ISAAH MHLANGA: Reserve Bank not a tool for boosting economic growth
History teaches us that nationalising or ambiguously expanding the mandate of the Bank would most likely result in macroeconomic instability as it will erode its independence
Globally, central banks are under attack, supposedly for having too narrow mandates that focus on price stability (low inflation), or for failing to boost economic growth when economies are not growing. I find this renewed impetuous to push for wider mandates for central banks in the run-up to national elections very suspicious and opportunistic. They are evidence of a lack of creativity in how to kick-start economic growth. In the US, President Donald Trump has frequently attacked the US Federal Reserve for hiking interest rates because it hurt economic growth, which raised concerns about the independence of the Fed. Turkish president Recep Tayyip Erdogan also put pressure on the Bank of Turkey to force it to cut rates ahead of an election. India’s politicians replaced Urjit Patel as its bank governor in 2018, the second governor to face political pressure after Raghuram Rajan, whose second term was not renewed in 2016. Patel’s successor immediately cut rates. In the UK, the same p...
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