Dealing with structural challenges not Reserve Bank mandate: Kganyago

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Reserve Bank Governor, Lesetja Kganyago has welcomed the Cyril Ramaphosa government’s efforts to address structural issues in an effort to boost growth.

However, he says dealing with structural challenges is a job for government and not the Reserve Bank.

Kganyago was referring to the Economic Reform paper published by Finance Minister Tito Mboweni in August.

Meanwhile, the Reserve Bank has kept rates unchanged 6,5%.

This means the prime lending rate remains at ten percent.

Kganyago says government has a task on its hands.

“We have been raising these things for a long time, that we need structural reforms to lift the potential growth rate of the economy and we are glad that finally, government is talking about that structural monetary policy … reacts to cyclical factors rather that long-term structural issues.”

Kganyago says the bank will not respond to the first round-shock of any ratings downgrade by Moody’s. Moody’s is the only major ratings agency that still has South Africa on investment grade.

He says the bank would assess the market’s reaction over time, if Moody’s was to downgrade the country.

Kganyago also announced that the bank’s monetary policy committee had decided to keep the repo rate unchanged at 6.5%, which means that the prime lending rate remains unchanged at 10%.

“If it is a downgrade, is it in current prices or not? If it is in current prices, then it should not have an effect. If second round effects kick in, the we would respond to those second round effects.”

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