Johannesburg - South Africa must “work with” last week's decision by the central bank to raise interest rates for the first time in nearly six years to combat inflation, Finance Minister Pravin Gordhan said on Monday.
While avoiding direct comment on the move, Gordhan reiterated the bank's independence, as well as its broadened mandate to consider the economy in addition to its core role of keeping inflation in a 3 to 6 percent target band.
“Their mandate is to apply their minds independently to price stability on the one hand but also to look at growth and employment issues on the other hand,” Gordhan told Reuters on the sidelines of a Johannesburg investment conference.
“They've given their judgment on that matter and the country has to work with it.”
Gordhan, a vocal emerging market policy maker, also called for greater coordiation between the G20 rich and developing nations to stabilise the world economy, currently typified by heavy selling of emerging market assets and currencies such as the rand.
The rand has lost 6 percent against the dollar this year, on top of nearly 20 percent last year, as global investors have chased improving returns in the likes of the United States. But Gordhan said they should not forget developing markets.
“Emerging markets are still important sources of global demand and sources of growth and sites of investment,” he said.
He also reiterated the government's stated policy of not intervening in markets to influence the exchange rate.
“A flexible exchange rate is the best way to absorb the shocks that we are seeing,” he said.
“We'll keep an eye on the situation.” - Reuters