South Africa’s central bank governor sounds alarm on ‘rightwing populism’

Digest opened free editor

Rola Khaleda, FT editor, chooses her favorite stories in this weekly newsletter.

The head of the Central Bank in South Africa has warned their counterparts in the world’s largest economies that their authority in setting interest rates is independent of political influence was at the threat of right -wing populism.

Letiga Kaniago, the ruler of the South African Reserve Bank, said that institutions are like Central banks It has become increasingly targets of attacks, as democracies have turned to the right of the political spectrum.

It was customary to be anxiety about the left -wing populism. He told the Financial Times of the Group of 20 financial meetings in Cape Town, who participated in his presidency. “There is one thing that populists always do, and it is attacking institutions.”

These notes confirm the anxiety caused by the rise of an extremist brand of populism, which tends to tyranny, which threatens independence not only from the leading central banks but also to multilateral institutions such as the World Bank.

The independence of the central bank was devoted during the 1970s and 1980, as banking authorities all over the world were handed over to control rates after a wave of inflation has proven difficult to tame in an environment in which political intervention in monetary policy was.

But the principle was subjected to a renewed threat, especially from Donald Trump, who accused critics of undermining the Federal Reserve Authority. The US President told the World Economic Forum in January that he “will demand interest rates immediately”, and recently criticized the Federal Reserve of doing “terrible work.”

Only a limited number of elected leaders before Trump sought to interfere in monetary policy, although Türkiye’s President Recep Tayyip Erdogan launched many of the central bank’s rulers to not reduce interest rates as he wants.

The Central Bank of South Africa was also under pressure from President Jacob Zuma in 2016, where his supporters demanded amending the constitution to change his mandate, on the pretext that it should be “nationalized”.

In a speech to the South African arbitration institution last month, Kanyago said that the bank “felt the duty to defend the independence of the Sarend as a major institution for our democracy,” so he went to the court to cancel the official reports on the pretext that the mandate had been changed. “The court ruled in our favor,” he said.

The meetings of the Group of Twenty of the Senior Finance Ministers and Central Banking were concluded on Thursday without any agreement on the priorities after some countries – which include the United States – took opposition views on issues including climate financing and the introduction of commercial tariffs.

A summary of the meetings found a general agreement that the independence of the central banks was “very important” to ensure price stability.

Kanyago, who has been governor of the bank since 2014, said the new wave of economic protectionism caused by Trump’s return to the White House has cast a shadow over global cooperation and risked a dangerous game of dream.

The ruler said: “To the extent that any country decides to impose a tariff on others, it affects global trade,” adding that revenge-is likely to be through measures other than the customs tariff-risks to undermine the global recovery after birth.

This scenario started playing this week, after Trump threatened to impose it 25 percent duties on the goods from the European UnionSaying that the bloc was created for the “United States Championship”.

French Finance Minister Eric Lombard replied: “It is clear that if the Americans maintain the tariff, as President Trump announced, the European Union will do the same thing, [as] We must also protect our interests. “

Kanyago said that the monetary institutions that were satisfied with “populism” are the most vulnerable.

“Central banks are not immune,” he said. “In any democracy, where there is a competition about the role of institutions, central banks must understand that there will be a competition about their role.”

“Our best defenses are honesty with the public and excellence in following up our states.”