ISAAH MHLANGA: Reserve Bank’s murky messages over rates move hurt confidence
The market expected a cut after messages by monetary policy committee members on various platforms
Communicating with ruthless clarity is always preferred in economic policy as it influences the expectations of market participants. Policy direction, or in central bank parlance “forward-guidance”, can build or destroy confidence, which is necessary for SA’s economic recovery after all the recent negative shocks.
In times of crisis, clarity of communication is even more crucial to dampen volatility, in addition to influencing the formation of expectations. The Reserve Bank monetary policy decision announced on September 17 was one of those in which better communication could have reinforced market confidence, but it instead left me and some other market participants with many questions.