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Pretoria - The South African Reserve Bank will continue to accumulate foreign reserves to tame the strength of the rand despite running up a financial loss over the last year, Governor Gill Marcus said on Tuesday.
"The reserve bank is not for profit. We take decisions in the interest of the country and the exchange rate is important in terms of its impact," Marcus said, adding that the bank did not target a specific level for the rand.
The bank made a R1.2bn after-tax loss for the second straight year in 2010-11, mainly due to the accumulation of $10.3bn worth of foreign-exchange reserves. The bank has, however, paid out a dividend of five cents a share to shareholders.
"We cannot determine our decisions based on whether we make a profit or not. We do not target a level for reserves," Marcus said.
Marcus also said that the global financial crisis had underlined the need for strong central banks.
"Our focus therefore continues to be on stability, which includes price stability, financial stability and the stability of the banking system," Marcus said. "Such stability provides an environment conducive to economic growth and employment creation."
She said the bank had reduced the repo rate to 5.5% since March 2010 and had maintained this stance, given low inflation and the relatively fragile nature of the domestic economic recovery.
However, signs that the economic recovery was becoming more "self-sustained" while global commodity price increases had begun to pose risks to the domestic inflation outlook were expected to create a "challenge" for monetary policy.
Inflation, an important factor considered by the bank during its rates decision, was also expected to temporarily breach the 3% to 6% target band in the first quarter of 2012.
"The risks to the inflation outlook are assessed to be on the upside," Marcus said.
"The reserve bank is not for profit. We take decisions in the interest of the country and the exchange rate is important in terms of its impact," Marcus said, adding that the bank did not target a specific level for the rand.
The bank made a R1.2bn after-tax loss for the second straight year in 2010-11, mainly due to the accumulation of $10.3bn worth of foreign-exchange reserves. The bank has, however, paid out a dividend of five cents a share to shareholders.
"We cannot determine our decisions based on whether we make a profit or not. We do not target a level for reserves," Marcus said.
Marcus also said that the global financial crisis had underlined the need for strong central banks.
"Our focus therefore continues to be on stability, which includes price stability, financial stability and the stability of the banking system," Marcus said. "Such stability provides an environment conducive to economic growth and employment creation."
She said the bank had reduced the repo rate to 5.5% since March 2010 and had maintained this stance, given low inflation and the relatively fragile nature of the domestic economic recovery.
However, signs that the economic recovery was becoming more "self-sustained" while global commodity price increases had begun to pose risks to the domestic inflation outlook were expected to create a "challenge" for monetary policy.
Inflation, an important factor considered by the bank during its rates decision, was also expected to temporarily breach the 3% to 6% target band in the first quarter of 2012.
"The risks to the inflation outlook are assessed to be on the upside," Marcus said.
