markets

Fed Hikes Augur Well for the World, South Africa's Kganyago Says

  • A strong U.S. economy is good for the global economy: governor
  • He says he prefers not to tell other central bank what to do

The Federal Reserve tightening monetary policy is a sign that the U.S. economy is doing well, and that’s positive for the rest of the world, South African central bank Governor Lesetja Kganyago said.

The Fed has communicated its monetary-policy intentions “very well,” Kganyago said in an interview Tuesday in Johannesburg. “If the Fed tightens policy because they think the U.S. economy is doing well and is growing -- a U.S. economy that is doing well is good for the global economy.”

The South African Reserve Bank’s seven-member Monetary Policy Committee unanimously decided to keep borrowing costs unchanged last month after easing in July and March. Expectations of further monetary-policy tightening by the Fed have been driving rand weakness, which is a key risk to South Africa’s price outlook, the MPC said.

The Federal Reserve meets later this month and is expected to raise interest rates.

Indian central bank Governor Urjit Patel made a plea to the Fed in an article in the Financial Times to slow the pace at which it plans to shrink its balance sheet to help emerging economies overcome recent market turmoil and avoid the possibility of a “sudden stop” for the global economic recovery.

“You’ve got to think about yourself as a U.S. policy maker, with an economy that is at full employment and you’ve got to say to yourself ‘what do I do in this instance?’,” Kganyago said. “As a matter of principle, I prefer not to say what central banks must do, because I don’t want them to tell me what I must do.”

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