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JOHANNESBURG, June 13 (Reuters) - South Africa’s central bank remains committed to its primary mandate of price stability, Governor Lesetja Kganyago said in a speech, days after a row in the governing party over the bank’s focus.
Senior officials in the African National Congress (ANC) party argued last week over whether the South African Reserve Bank’s mandate should be broadened to explicitly include job creation and economic growth alongside price stability.
The row unsettled financial markets as it was driven by factional fighting over how Africa’s most advanced economy should be run, rather than sober policy debate.
Kganyago is a staunch defender of the Reserve Bank’s independence.
“I would like to reiterate that the SARB remains committed to fulfilling its primary mandate of maintaining price stability in the interest of balanced and sustainable economic growth,” Kganyago said in the speech to diplomats on Wednesday.
The speech was sent to reporters on Thursday.
“There are expectations that monetary policy should shoulder more responsibilities in addressing growth constraints. However, these expectations need to be based on the constitutional or legislative mandates of central banks,” Kganyago added.
The central bank chief said the main contribution that monetary policy could make to economic growth was to smooth output fluctuations over the business cycle.
He said South Africa’s inflation-targeting framework had served the country well and that lower inflation created conditions for lower interest rates.
“Given the weak economy, our model suggests we might have room to cut rates over the next year or so,” Kganyago said.
Reporting by Alexander Winning; Editing by Angus MacSwan