1 00:00:02,880 --> 00:00:09,640 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Hi Brahma, thank you. 2 00:00:09,720 --> 00:00:11,080 Speaker 2: I was just going to say, this's a man next 3 00:00:11,080 --> 00:00:12,799 Speaker 2: to me who probably doesn't want the Fed reserve to 4 00:00:12,880 --> 00:00:15,120 Speaker 2: hike again. Anytime soon, I can catch up with my 5 00:00:15,160 --> 00:00:18,279 Speaker 2: old friend, Governor Laschaknyaga. Governor, thank you very much for 6 00:00:18,320 --> 00:00:19,279 Speaker 2: being with us in the IMF. 7 00:00:20,280 --> 00:00:20,960 Speaker 3: Good to be here. 8 00:00:21,120 --> 00:00:24,600 Speaker 2: Inflation comes down to five point three the market, the 9 00:00:24,640 --> 00:00:27,560 Speaker 2: general estimate, the consensus estimate was five point four. First question, 10 00:00:27,720 --> 00:00:29,319 Speaker 2: you kind of interest rates off the back of a 11 00:00:29,360 --> 00:00:30,680 Speaker 2: downside surprise like that. 12 00:00:31,120 --> 00:00:34,919 Speaker 3: Well, we had five point three as our forecast as 13 00:00:34,920 --> 00:00:37,760 Speaker 3: a central event, and I guess that the fact that 14 00:00:37,800 --> 00:00:41,959 Speaker 3: the markets get excited that the print jet supplies them 15 00:00:42,000 --> 00:00:44,920 Speaker 3: by zero point one just tends to you the extent 16 00:00:45,000 --> 00:00:48,479 Speaker 3: of the uncertainty that we are in. We have not 17 00:00:48,680 --> 00:00:53,239 Speaker 3: quite seen a disenible trend, because we had peaked at 18 00:00:53,280 --> 00:00:56,560 Speaker 3: seven point eight percent in twenty twenty two, and we 19 00:00:56,560 --> 00:00:58,880 Speaker 3: were coming down and nicely we went all the way 20 00:00:58,960 --> 00:01:01,840 Speaker 3: to four point seven, and then we started to go 21 00:01:02,120 --> 00:01:04,479 Speaker 3: up again and it rows all the way to five 22 00:01:04,480 --> 00:01:06,920 Speaker 3: point six, and we are now at five point three. 23 00:01:07,840 --> 00:01:11,880 Speaker 3: There isn't a discainible trend. But a look at the 24 00:01:11,920 --> 00:01:16,120 Speaker 3: components of inflation makes for an interesting read. Food prices 25 00:01:16,240 --> 00:01:21,240 Speaker 3: have continued their downwards trend. They might be reaching the bottoms. 26 00:01:21,280 --> 00:01:23,440 Speaker 3: Too early to tell, because we do not know the 27 00:01:23,480 --> 00:01:29,040 Speaker 3: effects of amino. Core has also now come down to 28 00:01:29,200 --> 00:01:33,280 Speaker 3: four nine percent, and we hope that it sustains. It 29 00:01:33,360 --> 00:01:38,360 Speaker 3: sustains that momentum, and so too early to tell what 30 00:01:38,440 --> 00:01:40,880 Speaker 3: a discernible trend would be. 31 00:01:40,920 --> 00:01:44,800 Speaker 2: Speaking of upside surprises or small surprises and big reactions, 32 00:01:45,000 --> 00:01:46,959 Speaker 2: so a similar thing in the United States last week 33 00:01:46,959 --> 00:01:47,559 Speaker 2: the other way around. 34 00:01:47,600 --> 00:01:48,760 Speaker 1: You had a downside surprise. 35 00:01:49,000 --> 00:01:51,360 Speaker 2: USCPI came in a little bit hotter than expected, and 36 00:01:51,360 --> 00:01:53,880 Speaker 2: all of a sudden, the markets, big moves in rates, 37 00:01:54,360 --> 00:01:57,120 Speaker 2: dollar a whole lot stronger, and big questions about central 38 00:01:57,120 --> 00:01:59,120 Speaker 2: banks abroad and the consequences for them. Could you give 39 00:01:59,200 --> 00:02:01,160 Speaker 2: us a bit of cover from that governor? What are 40 00:02:01,160 --> 00:02:04,400 Speaker 2: the consequences for you? How independent is your policy from 41 00:02:04,400 --> 00:02:06,400 Speaker 2: what the Federal Reserve may or may not do in 42 00:02:06,440 --> 00:02:08,360 Speaker 2: the future. 43 00:02:07,800 --> 00:02:12,160 Speaker 3: We watch the fat, we don't follow the fat. The 44 00:02:12,240 --> 00:02:18,440 Speaker 3: decisions of the FAT are reflect a key institution's take 45 00:02:19,040 --> 00:02:22,280 Speaker 3: on the US ECONOMICI is the largest economy in the world. 46 00:02:22,680 --> 00:02:26,120 Speaker 3: We are a small open economy. The actions of the 47 00:02:26,160 --> 00:02:30,840 Speaker 3: FAT have an impact on global financial conditions, and global 48 00:02:30,880 --> 00:02:35,560 Speaker 3: financial conditions have got implications for the direction of capital 49 00:02:35,600 --> 00:02:42,600 Speaker 3: flows and thus a realignment of exchange rates. And actually, 50 00:02:43,880 --> 00:02:47,120 Speaker 3: at our previous many of our meetings in the past, 51 00:02:47,400 --> 00:02:51,240 Speaker 3: we had highlighted that the type global financial conditions have 52 00:02:51,400 --> 00:02:56,200 Speaker 3: got implications for the exchange rate and by extension, could 53 00:02:56,600 --> 00:03:00,400 Speaker 3: lead to an impact on domestic on domestic price. There 54 00:03:00,440 --> 00:03:03,480 Speaker 3: are a range of other effectors, but we do not 55 00:03:03,680 --> 00:03:04,680 Speaker 3: follow the FAT. 56 00:03:04,760 --> 00:03:05,320 Speaker 1: We watch it. 57 00:03:05,760 --> 00:03:10,240 Speaker 3: We started tightening policy a good twelve months before the 58 00:03:10,240 --> 00:03:11,360 Speaker 3: FAT started doing it. 59 00:03:11,400 --> 00:03:13,000 Speaker 1: We started in twenty twenty one. 60 00:03:13,080 --> 00:03:16,119 Speaker 3: The FAT only started in twenty twenty twenty twenty two. 61 00:03:16,639 --> 00:03:19,720 Speaker 3: And but the actions of the FAT have got dute 62 00:03:19,720 --> 00:03:21,600 Speaker 3: implications for global financial. 63 00:03:21,240 --> 00:03:23,560 Speaker 2: Markets, big implications for the effects channel as well. The 64 00:03:23,560 --> 00:03:26,280 Speaker 2: rent's actually been pretty stable against the backdrop of a 65 00:03:26,360 --> 00:03:27,320 Speaker 2: much much stronger dollar. 66 00:03:27,320 --> 00:03:30,359 Speaker 1: Why do you think that is difficult. 67 00:03:30,160 --> 00:03:33,880 Speaker 3: To tell this currency, grets. I think that there had 68 00:03:33,919 --> 00:03:38,160 Speaker 3: been a lot of negative news that had gone into 69 00:03:38,200 --> 00:03:41,560 Speaker 3: the rent. There's been a lot of uncertainty and I 70 00:03:41,640 --> 00:03:43,960 Speaker 3: when I talked to market players in South Africa said 71 00:03:43,960 --> 00:03:46,560 Speaker 3: there is an uncertainty about the elections, and I said 72 00:03:46,600 --> 00:03:49,080 Speaker 3: that half of the more than half of the world 73 00:03:49,120 --> 00:03:52,960 Speaker 3: population is voting this year. What makes the South African 74 00:03:53,000 --> 00:03:55,920 Speaker 3: elections so specialist as well? The one thing is that 75 00:03:55,960 --> 00:03:58,200 Speaker 3: for the past thirty years, all that we knew was 76 00:03:58,640 --> 00:04:01,760 Speaker 3: one governing party, and now there is a possibility that 77 00:04:01,840 --> 00:04:04,760 Speaker 3: we might end up in a coalition. And if you 78 00:04:04,840 --> 00:04:06,640 Speaker 3: end up being a co edition, would we end up 79 00:04:06,640 --> 00:04:09,280 Speaker 3: with a co edition with And this is a lot 80 00:04:09,320 --> 00:04:12,840 Speaker 3: of uncertain which then says that to be the elections 81 00:04:12,880 --> 00:04:17,000 Speaker 3: behind us, And now everybody knows exactly what the political 82 00:04:17,040 --> 00:04:20,479 Speaker 3: outlook is. And if the concerns had been about that, 83 00:04:20,480 --> 00:04:24,960 Speaker 3: that means that it takes a week massive unta centile. 84 00:04:25,040 --> 00:04:27,960 Speaker 3: Then we have just been looking at the data and 85 00:04:28,000 --> 00:04:31,559 Speaker 3: whether we are picking up any distendable trend from the data. 86 00:04:31,720 --> 00:04:34,000 Speaker 2: You mentioned the politics. I didn't, So let's talk about 87 00:04:34,000 --> 00:04:37,080 Speaker 2: the politics. You've got an interesting calendar ahead of you. 88 00:04:37,120 --> 00:04:39,200 Speaker 2: I think the end of May is the election and 89 00:04:39,240 --> 00:04:40,320 Speaker 2: your policy decision is. 90 00:04:40,320 --> 00:04:41,360 Speaker 1: A day after. Is that right? 91 00:04:41,480 --> 00:04:42,120 Speaker 3: Yeah, that's got it. 92 00:04:42,200 --> 00:04:44,159 Speaker 2: So the conversation we're having in the United States, So 93 00:04:44,160 --> 00:04:45,359 Speaker 2: give me some color on that and I'll tell you 94 00:04:45,360 --> 00:04:45,880 Speaker 2: what it sounds like. 95 00:04:45,920 --> 00:04:47,040 Speaker 1: And I'm sure you're familiar with it. 96 00:04:47,320 --> 00:04:49,359 Speaker 2: There is this belief that Federal Reserve won't really do 97 00:04:49,440 --> 00:04:52,599 Speaker 2: anything around the election, that because they don't want to 98 00:04:52,600 --> 00:04:54,960 Speaker 2: get political, they'll avoid politics. But at the same time 99 00:04:54,960 --> 00:04:57,159 Speaker 2: they're considering politics to avoid being political. 100 00:04:57,760 --> 00:05:01,200 Speaker 1: How does that work for you. 101 00:05:00,080 --> 00:05:03,360 Speaker 3: Well, we are, we are very clear. They's an interesting thing. 102 00:05:04,080 --> 00:05:08,520 Speaker 3: We release a calendar of our policy meetings a year 103 00:05:08,600 --> 00:05:12,720 Speaker 3: in advance. We didn't know when the president will pronounce 104 00:05:12,760 --> 00:05:16,240 Speaker 3: an election, and he announces an election bang in the 105 00:05:16,279 --> 00:05:18,919 Speaker 3: middle of our policy meeting. 106 00:05:19,200 --> 00:05:20,920 Speaker 1: We have got to look through that. 107 00:05:21,000 --> 00:05:26,200 Speaker 3: And there is a reason why we are focused just 108 00:05:26,360 --> 00:05:29,720 Speaker 3: on data and we are taken away from the political 109 00:05:29,800 --> 00:05:32,840 Speaker 3: cycle so that we can actually make technical decisions and 110 00:05:32,920 --> 00:05:36,240 Speaker 3: not be affected by the political cycle. But there is 111 00:05:36,279 --> 00:05:40,960 Speaker 3: also something The President decided to insulate the Reserve Bank 112 00:05:41,720 --> 00:05:45,719 Speaker 3: from the political cycle by taking a decision about the 113 00:05:45,800 --> 00:05:48,960 Speaker 3: renewal of my term and those of my deputy governors 114 00:05:49,000 --> 00:05:52,880 Speaker 3: and the term of the Commissioner of the South African 115 00:05:52,960 --> 00:05:56,240 Speaker 3: Region said this is make those decisions ahead of the 116 00:05:56,320 --> 00:06:00,200 Speaker 3: elections so that it does not get affected by does 117 00:06:00,240 --> 00:06:03,080 Speaker 3: not get affected by the political by the political cycle. 118 00:06:03,240 --> 00:06:07,040 Speaker 3: So we make our decisions based on data, based on 119 00:06:07,200 --> 00:06:11,520 Speaker 3: our outlook for both growth and for for inflation. 120 00:06:11,839 --> 00:06:14,120 Speaker 2: So congratulations on a second term. I do have a 121 00:06:14,120 --> 00:06:16,520 Speaker 2: final question though, the conversation with the Treasury about a 122 00:06:16,560 --> 00:06:18,920 Speaker 2: new inflation target. Where are we with that and do 123 00:06:18,960 --> 00:06:21,039 Speaker 2: you expect to come to an agreement sometime soon? 124 00:06:22,480 --> 00:06:25,640 Speaker 3: There should be an agreement, but I don't expect anything 125 00:06:25,680 --> 00:06:29,160 Speaker 3: to happen before the elections. This is not like our 126 00:06:29,640 --> 00:06:34,760 Speaker 3: policy calibration decision. This is about the framework and making 127 00:06:35,160 --> 00:06:41,200 Speaker 3: changes on the framework. The Traacharity had commissioned a macroeconomic 128 00:06:42,200 --> 00:06:48,080 Speaker 3: review and as part of the budget documents they did 129 00:06:48,200 --> 00:06:51,960 Speaker 3: release a document on the macro review, including the consideration 130 00:06:52,160 --> 00:06:55,800 Speaker 3: of the lowering of a of the inflation target. That 131 00:06:55,960 --> 00:06:59,080 Speaker 3: is a conversation that we would we would continue. The 132 00:06:59,120 --> 00:07:02,279 Speaker 3: manner in which the the process works in South Africa 133 00:07:02,360 --> 00:07:07,400 Speaker 3: is that the Minister makes the announcement about a target, 134 00:07:07,720 --> 00:07:10,760 Speaker 3: but there is a process towards that announcement and that 135 00:07:10,800 --> 00:07:14,320 Speaker 3: process is a technical process between the Reserve Bank and 136 00:07:14,320 --> 00:07:15,120 Speaker 3: the National Treasure. 137 00:07:15,240 --> 00:07:17,080 Speaker 2: Governor has been very kind to give us so much time. 138 00:07:17,120 --> 00:07:19,240 Speaker 2: Thank you very much for being with us here in Washington, DC.