SARB May Intervene If Orderly Market in Jeopardy, Mminele Says

  • South Africa’s central bank won’t target specific rand level
  • No plans for emergency meeting policy meeting after Brexit

South Africa’s central bank will consider intervening in the foreign-exchange market if its orderly operation is threatened after the U.K. voted to leave the European Union, according to Deputy Governor Daniel Mminele.

“If we get into a situation where the moves are of such a nature that the orderly functioning of our market is in jeopardy, then we would consider getting involved,” Mminele said by phone from the capital, Pretoria, on Friday. “We would not become involved in the foreign-exchange market with a view of driving or influencing the rand towards a particular range or level.”

The rand lost as much as 8 percent against the dollar after the U.K.’s decision to quit the EU roiled global markets, and was 3.3 percent weaker at 14.9009 as of 5.15 p.m. in Johannesburg. Yields on rand-denominated government bonds due December 2026 rose 20 basis points to 9.08 percent.

“We will continue to monitor the situation very closely,” Mminele said. “Should we think it may be necessary at whatever appropriate time to ensure the orderly function of our markets, in the interest of financial stability, we wouldn’t stay away from acting.”

The Reserve Bank’s Monetary Policy Committee left the benchmark repurchase rate unchanged at 7 percent last month after raising it four times since July, and is due to announce its next interest rate decision on July 21. There are no plans for an emergency meeting to deal with the fallout of Brexit, Mminele said.

“It’s a question of analyzing the data and seeing what any currency movements suggest for the monetary policy outlook going forward,” he said. 

South Africa’s monetary policy dilemma of high inflation and slow growth became more pronounced after the economy contracted in the three months through March, Governor Lesetja Kganyago said on June 22. While inflation slowed to 6.1 percent in May, the lowest rate this year, the central bank has forecast price growth will only return to its 3 percent to 6 percent target band in the third quarter of next year as the weak rand and the worst drought in more than a century drive up costs.

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