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Governor Kganyago Warns That Fiscal Deterioration Leads To Higher Rates

SARB

Deputy Governor Kuben Naidoo refuses to provide detailed comments on fiscal policy but notes that as a rule of thumb looser fiscal policy leads to tighter monetary policy. Governor Kganyago earlier said that the central bank recommended certain policy measures that could help tackle inflation, which generally amount to more fiscal restrain.

  • Kganyago now adds that that fiscal deterioration translates into South Africa's risk premium, raising the neutral real rate. Hence, "deteriorating fiscal risks lead to higher interest rates". These comments shift the focus to Finance Minister Godongwana's Medium Term Budget Policy Statement (MTBPS) on November 1.

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