HILARY JOFFE: Here’s hoping Kganyago’s successor will clobber as he does
Bank governor and his team can claim the success of their monetary policy, but external shocks can't be ruled out
You have to hand it to Reserve Bank governor Lesetja Kganyago. He loves to give colourful economic explanations, but yesterday he excelled, treating journalists at Thursday’s monetary policy committee briefing to an account of a series of complex financial markets concepts in nursery school terms.
Were you wondering what the markets folk mean when they talk about spreads? Or about country risk premiums? Think butter or jam. Foreign investors will eat the US government’s slice of bread just as it is, lending to the US government at US treasury bond yields that are viewed as the risk-free rate. But when it comes to a small open economy such as SA with fiscal challenges, investors will demand some form of incentive to eat the bread. “They won’t eat unless you put some spread on it. That spread is the country risk premium,” says the governor. ..
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.