Has monetary policy independence been undermined?

Address by Gill Marcus, Governor of the South African Reserve Bank to the 1926 Rand Club, Johannesburg - 30 November 2010 

We are nearing the end of a difficult year, a year that began with so much promise but is now ending on a note of high uncertainty. On the global front, the expectations of a normalisation in the advanced economies were proved to be wrong, and indications are that low growth and accommodative monetary policies are likely to be sustained for some time. This has contributed to the strength of the rand exchange rate as capital continues to flow out of the advanced economies in search of higher yields. Domestically, growth has also disappointed. However the strong rand has contributed to the more benign inflation environment which, along with a persistent negative output gap, has contributed to lower interest rates.

UK financial regulatory reform supports SA Reserve Bank

George Osborne, Chancellor in the UK conservative-liberal coalition government, announced, on 16 June, the end of the existing, apparently ineffective, tripartite arrangement for financial regulation, implemented over a decade ago, in favour of a twin peaks approach*. The powers of the Bank of England will be significantly increased.

Click to view a presentation which outlines the UK Government’s plans to reform the institutional framework for financial regulation in order to avoid a repeat of the financial crisis.

Reform ahead for South Korean central bank

Price stability is no longer a sufficient target for central bank policy, according to South Korean central bank governor Kim Choong-soo. “Perceptions as to the desirable role of the central bank are now shifting greatly,” he said at a speech commemorating the 60th anniversary of the bank.

Changes ahead for the Bank include expanding its remit to include financial stability; fostering closer ties with other central banks; and calling in consultants to help with the restructure. A key task was to work out how the goal of financial stability would fit with the “prime” goal of price stability.

In what seemed a message to other central bankers, the governor underlined the need for an international response to future crises. He spoke of the “drive for international policy co-operation” and international discussions on a “global financial safety net”. Even large foreign exchange reserves would not safeguard South Korea from international crises, he said. Expect a more outward-looking central bank in the months and years ahead.