Read the following case study and answer questions that follow. The SARB fulfils its constitutional mandate...
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Read the following case study and answer questions that follow. The SARB fulfils its constitutional mandate to protect the value of the rand by keeping inflation low and steady. Monetary policy is the means by which central banks manage the money supply to achieve their goals. The SARB uses interest rates to influence the level of inflation. National Treasury, in consultation with the SARB, sets the inflation target, which acts as a benchmark against which price stability is measured. The SARB then independently makes monetary policy so as to achieve this target. The basic aim of monetary policy is to determine how much money an economy should have in circulation. The monetary policies of countries may differ, but most major economies aim for low and stable inflation, and have publicly announced inflation targets. To protect the value of the rand, the SARB uses inflation targeting, which aims to maintain consumer price inflation between 3% and 6%. The value of the currency is therefore protected relative to domestic consumer prices. Monetary policy is implemented by setting a short-term policy rate - the repo rate. This affects the borrowing costs of the financial sector, which, in turn, affect the broader economy. The repo rate is so called because banks give the SARB an asset, such as a government bond, in exchange for cash. They can later repurchase (repo) that asset at a lower price, which reflects the interest they paid (i.e. the repo rate) to have the cash. The SARB employs various tools and instruments to conduct monetary policy in South Africa. Critically discuss any five instruments of monetary policy. Read the following case study and answer questions that follow. The SARB fulfils its constitutional mandate to protect the value of the rand by keeping inflation low and steady. Monetary policy is the means by which central banks manage the money supply to achieve their goals. The SARB uses interest rates to influence the level of inflation. National Treasury, in consultation with the SARB, sets the inflation target, which acts as a benchmark against which price stability is measured. The SARB then independently makes monetary policy so as to achieve this target. The basic aim of monetary policy is to determine how much money an economy should have in circulation. The monetary policies of countries may differ, but most major economies aim for low and stable inflation, and have publicly announced inflation targets. To protect the value of the rand, the SARB uses inflation targeting, which aims to maintain consumer price inflation between 3% and 6%. The value of the currency is therefore protected relative to domestic consumer prices. Monetary policy is implemented by setting a short-term policy rate - the repo rate. This affects the borrowing costs of the financial sector, which, in turn, affect the broader economy. The repo rate is so called because banks give the SARB an asset, such as a government bond, in exchange for cash. They can later repurchase (repo) that asset at a lower price, which reflects the interest they paid (i.e. the repo rate) to have the cash. The SARB employs various tools and instruments to conduct monetary policy in South Africa. Critically discuss any five instruments of monetary policy.
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In the given passage the text mentions the South African Reserve Bank SARB and its use of monetary policy to achieve its goals It refers to the SARBs ... View the full answer
Related Book For
Business Law Principles and Practices
ISBN: 978-1133586562
9th edition
Authors: Arnold J. Goldman, William D. Sigismond
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