South Africa’s central bank Governor Lesetja Kganyago said on Thursday that the bank would not step in to protect the local currency despite its current weakness and that the rand was caught up in a realignment of global currencies.
Kganyago told a webinar that the bank was only concerned about the currency to the extent that it fed into inflation and would not take any measures to defend it.
“It’s a futile exercise trying to defend the exchange rate,” Kganyago said.
The rand has weakened about 13% against the greenback this year.
Nonetheless, Kganyago said the bank’s main concern remained fighting inflation, reiterating that risks to the inflation outlook included food prices, oil prices and exchange-rate moves.
South Africa’s consumer inflation edged up to 4.8% year-on-year in August from 4.7% in July, but it still remains comfortably within the central bank’s target range of between 3%-6%.
The South African Reserve Bank (Sarb) kept its main lending rate unchanged at 8.25% at its last meeting in September and Kganyago has been reluctant to suggest that rates may soon start to fall.
“I wouldn’t say inflation is going to be volatile, but it may remain higher for longer than we think,” said Kganyago.
The Sarb will have its final monetary policy committee meeting in November.
COMMENTS 7
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Admit it Kganyago you are powerless in this windstorm.
All you have done so far is impoverish the middle class and stifled new companies through exorbitant interest rates.
The economic impact of your failures will be seen in the increase of joblessness!!
Viva ANC !~!!!
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Governor 100% correct!!!!!!!
No merit in defending your currency in the face of fiscal irresponsibility by the US Administration.
Causing complete chaos in their own and global markets as they fail to address inadequacies in their own political and fiscal platforms. Greater pressure in the EM currencies and once again a huge signal that the sooner the $ is discarded as a “bankable” currency, the better!!!!!!!!!!!!
The FED is no one’s friend. Any alternative is better, BRICS looms large!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
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If you are puzzled about why you have to keep replacing your keyboards, its because you wear out the ! key.
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The governor is like a Jack Russel who believes he is a pitbull terrier. He barks at and mock-charges the pitbull, but stays at a safe distance.
He professes his independence and strengths, and he boasts about his authority while he ignores his weaknesses. He is totally exposed to the redistributive policies and activities of Luthuli House. The ANC is fast depleting the value of all collateral and assets held in the banking system, and that issue will inevitably end up in the lap of the lovely Governor. When that pitbull snaps his chain, it won’t be a pretty sight.
The governor has the power to refuse to defend the currency but he has a mandate to “create liquidity” in the banking system and to save the financial system from systemic collapse. For this task, he has only one flimsy little tool, called currency devaluation, in his little toolbox.
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I actually feel for him, Sensei. He talks sense and I think he knows full well he is between a rock and a hard place. And then some. But when all is said and done he will do as his political masters bid. He will eventually fire up the printing press.
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I agree with your sentiments. We need more people like him in positions of power because he uses his power with integrity and he is accountable to the general population as well as to international monetary institutions.
I salute the man. He determines our ability to afford basic necessities in the next decade.
His policies ultimately determine the rand price of toilet paper, or alternatively stated, the value of the rand relative to a sheet of toilet paper.
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Jip – He had better start designing and printing R1000 and R100 000 bills soon !!!!!!
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