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Current economic conditions not suitable for quantitative easing - Kganyago

Quantitative easing refers to a monetary policy in which the central bank buys pre-determined amounts of government bonds or other financial assets to inject money into the economy.

FILE: Reserve Bank Governor Lesetja Kganyago. Picture: GCIS.

JOHANNESBURG - Reserve Bank governor Lesetja Kganyago said the current economic conditions in the country were not right for quantitative easing.

Quantitative easing refers to a monetary policy where the central bank buys pre-determined amounts of government bonds or other financial assets to inject money into the economy.

On Tuesday, African National Congress secretary-general Ace Magashule told journalists that the party would set up a task team to explore quantitative easing measures to address inter-governmental debt to make funds available for developmental purposes.

Kganyago said for quantitative easing to be explored, numerous options should first be considered.

“The first condition is that inflation should have dropped so low that there is a threat that inflation could drop below zero, meaning we are experiencing deflation. The second one is that, the central bank, in trying to combat deflation, cut rates so low that interest rates got close to zero and because the interest rates are so close to zero, they have become ineffective,” he said

(Edited by Mihlali Ntsabo)

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