TUESDAY, 11.00AM:
Reserve Bank governor Chris Stals says there is not much the central bank or the government can do to protect South Africa from developments on international markets. Stals was speaking in Somerset West this morning, at the South African Chamber of Commerce (Sacob) annual conference.
“Once we have gone through this, maybe we will have even greater stability and a better basis for sound growth,” Stals said, referring to the recent drops on the Johannesburg Stock Exchange. Stals said also that the recent volatility in stock markets does not necessarily mean interest rates should rise once more. After the stock market crash of 1987, banks actually reduced interest rates, he said.
According to Stals, the drop in asset prices is deflationary, as it reduces consumers’ purchasing power and helps bring stability back into the system.
“Maybe this kind of adjustment is just what we need to get stability back into the financial markets and to get the rate of bank credit extension and the creation of money back under control again,” Stals said. “Once we have gone through this, maybe we will have even greater stability and a better basis for sound growth.”
Today’s volatility did not mean that the Reserve Bank would have to put up interest rates, he said. After the stock market crash of 1987, banks actually reduced interest rates.
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