Reserve Bank says it won't respond to short term market volatility

The rand fell more than 1% against the dollar today, extending losses after Gordhan summoned by Hawks.

Finance Minister Pravin Gordhan. Picture: Christa Eybers/EWN

PRETORIA - The South African Reserve Bank will not respond to short term volatility triggered by news of possible charges against Finance Minister Pravin Gordhan, Deputy Governor Daniel Mminele said on Monday.

The rand fell more than one percent against the dollar on Monday, and bonds were also down sharply, extending losses triggered by news last week that police had summoned Gordhan to answer questions over a surveillance unit set up when he was in charge of the revenue service.

"Clearly from a policy perspective as far as the South African Reserve Bank is concerned ... we would not be focusing on short term market run movements", Mminele told reporters.

"We will have to see how sustained that is but there can be no question that from the point of view of shoring up investor confidence people have to have comfort around the policy framework," he added.

Any sustained rand weakness could fuel inflation, which currently stands at 6.0 percent, on the upper end of the central bank's three to six percent target range. The central bank says it expects it to remain above the target until the middle of 2017.

Last week, Mminele said South Africa's rate hiking cycle was not yet over as inflation remained elevated and sharp moves in the rand were affecting prices.

The Reserve Bank, which has forecast zero growth this year, kept interest rates on hold in July, saying the weak economy had persuaded it to pause a cycle of hikes that it was ready to resume if price pressures picked up again.