INFLATION TARGETING
HILARY JOFFE: Court helps sanctify Reserve Bank’s role
‘The court case has provided a crucial forum in which to air the big issue of what monetary policy can and cannot do’
Ratings agency Moody’s had pencilled in Friday for a scheduled update on its South African rating. But it opted to pass this time, without releasing even one of its erudite "in-depth" reports. One reason, perhaps, was that it had already done just that two weeks before, when Moody’s released a report on the Reserve Bank’s surprise July 20 decision to cut interest rates by 25 basis points. Ratings agencies employ excellent economists, but it’s not usually their style to comment on interest rates. That Moody’s did so this time was clearly because of the threat to the Bank’s independence and its price stability mandate. In the event, Moody’s came out firmly in support of the rate-cut decision as being justified on economic merits. But the agency raised the red flag about the public protector’s call for a constitutional change to the Bank’s mandate and used the report to warn that political pressure for less independent monetary policy could be a big problem for SA’s rating.It was a sob...
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