The content on this page is not written by Polity.org.za, but is supplied by third parties. This content does not constitute news reporting by Polity.org.za.

The South African Reserve Bank (SARB) Monetary Policy Committee will meet tomorrow and Thursday. Given recent pronouncements by the Minister of Finance on the need for monetary policy steps to restrain the strongly appreciating rand, and the fact that our real interest rate is the second highest in the world, a rate cut is likely. The SARB needs to consider the inflation outlook over the medium term. The National Treasury estimates that headline CPI inflation will increase to 5.2% by 2013 - a reflection of their expectation of a lower interest rate regime placing upward pressure on the currently lower rate of inflation.

Although a lower interest rate will ease the burden on consumers, and stimulate economic activity, it is unlikely to make any significant impact on restraining the value of the currency given relatively lower real rates in almost every other jurisdiction - and thus attractive arbitrage opportunities in short term investment in the rand.

At a recent conference of the SARB, Governor Gill Marcus pointed out that monetary policy is not the only instrument available in the arsenal. We agree. Fiscal policy should not contradict monetary policy interventions. Although the vast majority of South Africans are net consumers, the net savers in our economy must not be left behind. As we enter a lower interest rate cycle, pensioners who rely on fixed income are disadvantaged, as are members of pension funds who retire into lower annuity rates and thus lower pensions that do not adequately compensate over time as inflation increases. For this reason, the DA believes that steps must be taken by National Treasury to increase the tax rebate applicable to pensioner income from interest bearing investments.