South Africa, as an emerging market, is probably not in a position to begin “quantitative easing”. To be honest, there is an element of discrimination at play here. When the European Central Bank or the Bank of Japan embark on such a path, it is labelled “quantitative easing”. When a developing economy tries something similar, it is seen as printing money, pure and simple – the last resort of a banana republic. That may not be entirely fair, but there you go.
Politically, this is all a transparent proxy conflict between President Cyril Ramaphosa’s supporters and those from the camp of disgraced former president Jacob Zuma. But there is an area of monetary policy that involves easing that has wider political support, does not involve changing the SARB’s mandate, and would probably give the economy at least some of the stimulus it needs without reigniting inflation.
This gives the Reserve Bank plenty of room to cut rates. Inflation in April was, by South African standards, a tame 4.4%, almost smack in the middle of the central bank’s 3-6% target band. Moderate inflation is largely the result of subdued demand, sky-high unemployment and an economy that is clearly on the rocks. Even crude oil prices, which have been one of the main sources of price pressures in the economy, are currently near four-month lows.
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