South African Reserve Bank Governor Lesetja Kganyago warned against unrealistic expectations about what central banks can do to soften the coronavirus\u2019s impact, and said they should remain focused on maintaining price and financial stability.<\/p>\n
Kganyago\u2019s comments, made in an interview with Bloomberg TV on Monday, came in the wake of calls by senior politicians for the Reserve Bank to play an enhanced role in bolstering South Africa\u2019s economy.<\/p>\n
Enoch Godongwana, the ruling party\u2019s head of economic transformation, suggested that the central bank help finance development and infrastructure through the creation of a R500 billion ($29 billion) fund, while deputy finance Minister David Masondo has said he would support direct central bank purchases of government debt.<\/p>\n
The Reserve Bank doesn\u2019t respond to political parties as a matter of policy, Kganyago said.<\/p>\n
However, as the role that central banks can play globally in aiding economies is discussed \u201cwe need to be very clear there are limits as to what central banks can do,\u201d he said.<\/p>\n
\u201cIt would be wrong to drag central banks into making spending decisions because they are run by technocrats and not by public representatives.\u201d<\/p>\n
Rate cuts<\/strong><\/p>\n With Africa\u2019s most-industrialised economy expected to contract the most in at least four decades due to a lockdown imposed to curb the coronavirus\u2019s spread, the central bank has cut its benchmark repurchase rate by 275 basis points this year, taking it to the lowest level since it was introduced in 1998.<\/p>\n It\u2019s also relaxed accounting and capital rules to release additional money for lending and more than doubled its holdings of South African government debt, helping to reduce borrowing costs in the domestic bond market.<\/p>\n Even so, the Reserve Bank\u2019s critics accuse it of not doing enough to support the economy and create jobs in a country where almost third of the workforce was unemployed even before the coronavirus struck.<\/p>\n The full impact of monetary policy measures are only likely to filter through during the gradual and phased reopening of South Africa\u2019s economy, and the central bank stands ready to provide additional support as necessary, Kganyago said.<\/p>\n \u201cInflation is not a problem for the next 12 months,\u201d he said. The central bank aims to anchor price growth at 4.5% and with the average projected close to the 3% lower bound of the target range this year \u201cthat gives us some monetary policy space,\u201d he said.<\/p>\n
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