Answer to Question #194850 in Microeconomics for Francois Rautenbac

Question

The next Monetary Policy Committee meeting is taking place on 18-20 May 2021. The ongoing debate at the moment is that the SARB is not doing enough to help the government with its growing debt crisis, hence there has been recalls of the institution doing more than lowering the repo rate. Is this argument justified? How would you suggest the SARB proceed, taking into consideration the current fiscus issues? Provide a short monetary policy package in light of the above mentioned situation and use practical case studies to back up your answer.

(need about 600-800 words.)

Answer 1

The decision of the institution to lower the repo rate was appreciated by the country citizens. It was based on (bpps) bureau for policy and program support that is 50 basis points, 3.1% on may 2021. This has led to a reduction of 275 bps, the lowest in history.

They should lower the interest rates. This will be good as it will give good effect since the country is on a pandemic. i.e covid 19.

Apply expansionary monetary policy by decreasing the discount rates so as to encourage economic growth. This will make the economy to come on the right track compared to previous year.