The Bank has implemented important measures, including lowering rates and making liquidity available to banks
It is now clear that the Covid-19 outbreak will produce the worst economic downturn in a century, with output expected to contract by about 7% in 2020. The SA Reserve Bank has responded flexibly, quickly and aggressively to this crisis. Our five most important measures have been as follows:
We have provided regulatory relief to the financial sector to help maintain the flow of credit in the economy despite the temporary payment problems for firms and households caused by the Covid-19 shock. These actions have improved market functioning, and are supporting economic activity. The outlook remains highly uncertain, however, so we are watching the data closely and are ready to act as appropriate to uphold our mandate. In doing so we are guided by a few important considerations.
Any decision to move along the spectrum needs to be embedded in our inflation-targeting framework. Getting the inflation forecast right gives us credibility to shift along the bond-buying policy spectrum without tipping into higher inflation. Judging by the recent moderation in long-term rates and lower inflation levels, it appears we have got the overall policy effort about right for the moment.
As many economists have pointed out, sustainability concerns have to be addressed at a fiscal level. This means the debt-to-GDP ratio has to stabilise, and those projections need to be realistic. If debt sustainability can be assured, with high probability, then near-term borrowing will be more readily available.
I have heard it suggested that we should consider quantitative easing with conditions. But we are a national central bank. The constitution tells us the Bank must protect the value of the currency, and that we must have regular discussions with the finance minister. Nowhere does it say I can set conditions. As such, the Bank cannot take responsibility for solving a fiscal sustainability problem, nor can it jeopardise the value of the currency by agreeing to inflationary money printing.
South Africa Latest News, South Africa Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
LESETJA KGANYAGO: Reserve Bank’s aggressive response has helped allay economic crisisThe Bank has implemented important measures, including lowering rates and making liquidity available to banks
Read more »
SA running out of time to avoid Argentina’s fate, Lesetja Kganyago saysThe Reserve Bank governor cautions against letting ideological conflicts hasten SA's economic decline
Read more »
Banks, Treasury and Reserve Bank in talks to improve Covid-19 loan schemeThe Banking Association SA says it is in discussions with the Treasury and Reserve Bank to find ways to introduce more flexibility
Read more »
BHEKI NTSHALINTSHALI: In thrall to big capital, the Reserve Bank is failing the people of SAThe Bank should be independent of finance capital, which exerts an inordinate amount of influence on economic activity
Read more »
BUSINESS MAVERICK: SARB’s Kganyago injects some reality into the concept of ‘magic money’South African Reserve Bank Governor Lesetja Kganyago has a message for the bond markets, economists, policymakers, the RET gang and the wider public. South Africa does not have ‘magical’ sources of money. He is not about to wave a wand, intone ‘Abracadabra’ and embark on a bond-buying binge that will miraculously save the economy.
Read more »
SOEs could help drive post-Covid economic recovery, says RamaphosaThe president says the crisis will create a post-war economic situation that will need state-led interventions
Read more »