Publications
Partners
Johannesburg - Monetary policy is not the ultimate answer to South Africa’s economic problems and reforms are needed to increase its growth potential, Reserve Bank governor Gill Marcus said in an article published on Wednesday.
“Unfortunately, there is a misconception that monetary policy is the main policy level in the economy,” she said in the article in the Financial Mail magazine to commemorate the bank’s 90 years.
“In many instances, we are assumed to have powers way beyond our capabilities.”
The Reserve Bank has left interest rates unchanged at 5.5% this year, with some pressure being taken off decisionmakers by inflation being inside the bank’s target band since February 2010.
But retail sales data and manufacturing data have remained weak, suggesting the economy is likely to have slowed in the second quarter from 4.8% in the first quarter.
The central bank cut rates by 650 basis points between end-2008 and end-2010 to 30-year lows.
Union allies of the ANC have long called for even looser monetary policy they say will support the economy and stop job losses that have left more than a million people unemployed since the recession in 2009.
Job creation is likely to remain subdued over the next few years as the economy is expected to grow by an average 3% to 4% a year, far less than the 7% the government has said is needed to significantly lower the unemployment rate.
Marcus said “structural and/or microeconomic policies” were needed to reduce bottlenecks to growth.
“Monetary policy can’t fix the education system or the transport system... The problem is so big we will have to tackle all these areas to get to grips with unemployment.
"We cannot buy economic growth through excessively low interest rates. The inflationary consequences of such a policy would erode any real advantages,” she said.
“Unfortunately, there is a misconception that monetary policy is the main policy level in the economy,” she said in the article in the Financial Mail magazine to commemorate the bank’s 90 years.
“In many instances, we are assumed to have powers way beyond our capabilities.”
The Reserve Bank has left interest rates unchanged at 5.5% this year, with some pressure being taken off decisionmakers by inflation being inside the bank’s target band since February 2010.
But retail sales data and manufacturing data have remained weak, suggesting the economy is likely to have slowed in the second quarter from 4.8% in the first quarter.
The central bank cut rates by 650 basis points between end-2008 and end-2010 to 30-year lows.
Union allies of the ANC have long called for even looser monetary policy they say will support the economy and stop job losses that have left more than a million people unemployed since the recession in 2009.
Job creation is likely to remain subdued over the next few years as the economy is expected to grow by an average 3% to 4% a year, far less than the 7% the government has said is needed to significantly lower the unemployment rate.
Marcus said “structural and/or microeconomic policies” were needed to reduce bottlenecks to growth.
“Monetary policy can’t fix the education system or the transport system... The problem is so big we will have to tackle all these areas to get to grips with unemployment.
"We cannot buy economic growth through excessively low interest rates. The inflationary consequences of such a policy would erode any real advantages,” she said.
