EDITORIAL: Bank enhances stability policy
The Reserve Bank's expanded mandate and steady hand are invaluable as the list of global and local risks grows
When SA experiences sudden surges in capital inflows or capital outflows, we tend to focus mainly on the effect this has on the rand exchange rate. Then if the rand appreciates or depreciates, we might go on to project what this might mean for the inflation outlook and whether it might change the Reserve Bank’s next monetary policy decision. The piece of the puzzle that markets and media seldom consider — and probably just as well — is the effect these huge washes of capital can have on SA’s financial system. In fact, the frequent turnarounds in capital flows of recent years, in incidents such as the 2013 "taper tantrum" or our own 9/12 Nenegate disaster last year, seem to have caused little indigestion to banks, bourses, insurers or fund managers. But they are examples of the kinds of risk to financial stability the Bank manages as part of its mandate, which for some years now has included not only price stability, but also financial stability. That’s really about monitoring and ma...
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