[LISTEN] Kganyago: Conditions for quantitative easing 'do not exist'

This comes after the African National Congress (ANC) announced on Tuesday that a lekgotla of the party’s national executive committee had agreed to expand the Reserve Bank’s mandate.

Kganyago said the constitutional mandate of the Reserve Bank is to protect the value of the currency in the interest of balanced and sustainable growth in the country.

The governor was speaking at the launch of six new commemorative circulation coins, to celebrate 25 years of democracy, at Constitutional Hill.

“The architects of our constitution were visionaries. They understood that price stability is a necessary condition for growth. But it is by no means a sufficient condition for growth,” he said.

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He explained that the Reserve Bank’s contribution to growth is through price stability.

The ANC’s secretary-general Ace Magashule also revealed on Tuesday that the governing party will form a task team to explore quantitative easing.

This is a policy used by central banks in the US and Europe to inject money into the economy by buying government assets, such as bonds.

Kganyago warned that, for quantitative easing to be explored, two conditions must be taken into account.

One condition is that the inflation rate must be so low that it threatens to go below 0%.

“The second condition is that interest rates must be so low that borrowers and savers no longer care about where the interest rates are,” Kganyago said, adding that neither of the conditions exists in South Africa.

“Inflation is not zero in South Africa and does not threaten to go below zero. Interest rates are not zero and quite frankly, the credit markets in South Africa are functioning. There is proper interaction between creditors, being the lenders, and the borrowers.”

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