HILARY JOFFE: Politics and the central bank are never a comfortable fit
Good monetary policy should be predictable and transparent
When the US Federal Reserve did a sudden turnabout this week, suggesting it had dropped plans for further interest rates this year, bemused economists inevitably asked whether the Fed was bowing to pressure from US President Donald Trump - who last year accused the Fed of "going crazy" by raising rates. The Fed held rates as expected but spoke a language that was much more dovish than before, emphasising the risks of slower global and US growth. Its comments were a gift to emerging-market currencies, including the rand, which bounced to seven-month highs. But the market's volatile response illustrated one of the many dangers of attempts by politicians to interfere with central banks - which is that it can poison attempts to assess monetary policy decisions. Was this good or bad, based on the economics? It becomes hard to say when it's not even clear that economics, rather than politics, were the main driver. Good monetary policy should be predictable and transparent, with central ba...
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.