SARB recommends stable monetary policy

The South African Reserve Bank (SARB) said on Tuesday in its latest Monetary Policy Review that in light of the risks around the subprime crisis in global markets, it is important to maintain a stable and transparent monetary policy regime.

The SARB noted that authorities in some emerging markets have been advised to strengthen surveillance to ensure vulnerabilities to the crisis do not build to more systemic levels, although emerging markets have not been disrupted as severely as developed economies and even though banking systems in emerging markets are currently profitable and well capitalised.

In a recent speech, SARB Governor Tito Mboweni pointed out that an investigation done by the bank had shown that South African banks were sound.

“Sharp swings in financial market prices and volumes that change the financial conditions for the real economy can affect both the central forecast and, perhaps to a greater extent, the risks around the forecast,” stated the SARB.

“This, in turn, could lead to a change in policy stance and amounts to a middle way on the important question of moral hazard, ie no policy rate cuts simply to bail out distressed investors, but no undue risks with the economy to prove the point. These risks accentuate the importance of maintaining a stable and transparent monetary policy regime,” concluded the bank. — I-Net Bridge


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