“The Reserve Bank has lost the plot. There is zero demand inflation in this economy, and they need to put a bit of faith into the future,” he told a PPC breakfast event at which the listed cement and lime producer launched an improved and extended product range.
Botha said former Reserve Bank governor Gill Marcus realised that the central bank’s mission was to ensure it kept inflation low, but not to do this at the cost of a recession.
He said Marcus targeted a real prime interest rate of 10percent, which meant the real repo rate, after taking inflation into account, was negative, but only by about 50 basis points. Botha said this interest rate level was more or less in line with South Africa’s peers.
But Botha said “the new kids on the block” at the Reserve Bank had doubled the real interest rate, which was exactly what should not be done when there was a need to grow the economy.