: Challenge for central banks to ensure independence not undermined

Kganyago: Challenge for central banks to ensure independence not undermined

Mar 02 2018 17:47

Carin Smith

 

 Cape Town - An independent central bank, with a clear mandate to maintain price stability and without the concerns of the electoral cycle, is better-placed to focus on and achieve price stability, according to SA Reserve Bank governor Lesetja Kganyago.
He spoke at the National Asset and Liability Management Conference in London on Friday.
"The policies that are available to achieve or maintain financial stability often require cooperation between various regulatory authorities. A challenge for central banks is ensuring that monetary-policy independence is not undermined in the process. This is particularly the case in the event of conflicts between competing objectives," said Kganyago

 

SARB governor Lesetja Kganyago.

 "If independence is to be maintained, central banks need to foster the political consensus that underpins independence. This requires even greater transparency and accountability than in the case of monetary policy."
In his view, central banks also need to have the courage and political backing to make tough calls.

 "There is always the danger that unhappiness with central-bank actions in the financial-stability field could undermine the credibility and legitimacy with respect to their core mandate of price stability," he said.
Kganyago pointed out that it is generally accepted among central bankers that, while monetary policy can affect cyclical growth, its ability to determine longer-term potential output is limited.

https://www.fin24.com/Economy/kganyago-challenge-for-central-banks-to-ensure-independence-not-undermined-20180302