Lesetja Kganyago: Keeping it simple - monetary policy, growth and jobs in South Africa

Public lecture by Mr Lesetja Kganyago, Governor of the South African Reserve Bank, at the Wits School of Governance, Johannesburg, 1 November 2022.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

Good morning, ladies and gentlemen.

Central banks are important, long-standing expressions of a universal need for stability in social and economic affairs. Their goals centre on achieving some definition of price stability, and in more recent decades, their methods have fixed primarily on inflation targeting.

Where they directly target inflation, central banks' primary tool is the policy rate, normally defined as a very short-term or overnight borrowing rate. At this rate, banks can borrow from the central bank to address overnight needs for liquidity and this marginal borrowing rate sets the basis for all other lending rates in the economy. A secondary policy tool is a blend of communications about current economic conditions and the policy rate level. A third encompasses the requirements and flexibility of the policy framework – the target itself and how it is measured.

In more recent years, and under the impact of deflationary conditions, a few advanced economy central banks have adapted their approaches with secondary targets, such as inflation averages over time and unemployment rates.