ZARibor and other financial market reforms need national support
Proposed changes should lead to a more transparent, certain and efficient system of pricing money
Monetary policy in inflation-targeting countries such as SA relies on the central bank being able to influence the interest rates households and businesses encounter in the real world. While most people will be aware of the policy rate as set by their central bank, few know much about how the policy rate feeds through to the economy. Yet these mechanics are crucial to the success of monetary policy and financial market development. Current reform efforts in SA will allow fundamental changes to these mechanics.
In a speech delivered on October 8, US Federal Reserve chair Jerome Powell spoke about the need to maintain an appropriate level of reserves in the banking system. (A simple way to think of reserves is that they are deposits the commercial banks hold with the central bank.) This was said in the context of recent volatility in the market-determined federal funds rate, the interest rate at which commercial banks lend reserve balances to each other...
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