The South Africa Reserve Bank has the freedom to adjust monetary policy without having to follow the Federal Reserve’s interest-rate hikes, according to governor Lesetja Kganyago. | News24_Business
The South Africa Reserve Bank has the freedom to adjust monetary policy without having to follow the Federal Reserve’s interest-rate hikes, according to governor Lesetja Kganyago.
"The Fed affects us because their actions tighten global financial conditions, and that in the main leads to a realignment of exchange rates, including the South African rand. Depending on what has happened to the movement in the rand — which feeds through into inflation — that is our reaction function," Governor Lesetja Kganyago said Wednesday."We do not try and follow what the Fed is doing with respect to interest rates.
Average inflation expectations for the year — as measured by a survey of analysts, business people, labor unions and households — rose to 6.3% in the first quarter. That’s as persistent power outages, logistic-network constraints and currency weakness stoke price growth in Africa’s most industrialized economy.
Its strategy has meant South Africa hasn’t seen the scale of inflation-target misses experienced by some of its developed and emerging-market peers. The central bank’s increasingly hawkish stance in March suggests Kganyago is reluctant to pivot away from tightening even as the country’s economic growth prospects deteriorate. The Reserve Bank sees the economy expanding just 0.2% this year, with persistent power outages seen shaving 2 percentage points off output growth.
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