Reserve Bank knows its responsibility during an epidemic — Mboweni

Finance minister Tito Mboweni  said he was in conversation with the SA Reserve Bank over how to respond to the economic effects of the coronavirus, and pleaded for an end to the pressure on the central bank to slash interest rates in response to the disease.

“The SA Reserve Bank knows its responsibilities in times of [an] epidemic. Don’t over-pressurise them,” Mboweni said on Monday.

“Leave the conversation to me and the governor of the Reserve Bank — it’s taking place, so don’t worry about that.” 

Mboweni was speaking at a media conference, alongside a number of other ministers, outlining SA’s efforts to deal with the spread of the virus.

On Sunday evening, president Cyril Ramaphosa declared a national disaster in response to the pandemic, which began in Wuhan, China.

Ramaphosa announced a series of measures, including the closure of schools, travel bans for people from high-risk countries and the prohibition of gatherings of more than 100 people.

The state is also finalising a package of  interventions to mitigate the effects on the economy, Ramaphosa said.  

The SA Reserve Bank will still hold its scheduled monetary policy committee meeting as planned on Wednesday and Thursday, after which it will make an announcement on whether to cut rates.

The bank confirmed late on Sunday that the MPC meeting would go ahead as planned, though it is due to publish an advisory later regarding the logistics surrounding the actual briefing, ordinarily held at its offices in Pretoria.

Ramaphosa’s Sunday announcement coincided with another unexpected move by the US Federal Reserve to cut its benchmark rate to close to zero and restart quantitative easing — the asset-buying programme aimed at injecting liquidity into the financial system.

This is the second such emergency step taken by the US central bank in March.

The measures from US authorities was important to prevent a freeze in global liquidity, Mboweni said.

“One of the most important sources of global liquidity is the US dollar and the American authorities have already intervened to make sure that the Fed is able to provide $1.5-trillion (about R24.7-trillion) of liquidity, which oils the global economy,” he said.

Other central banks have taken similar steps in recent weeks, in an attempt to ameliorate the economic effect of the virus. — BusinessLIVE