told to follow major advanced economies and launch a big quantitative easing ( qe ) programme. so much for the claim that richcountry policies don ’ t work in developing countries! this brings me to the next part of my speech, which is about new challenges to inflation targeting. in south africa, there is a surprising amount of interest in qe. from being arcane jargon, many people have suddenly developed passionate views about it, and it gets lots of media interest. given all this, let me summarise where we are in this conversation. as i explained in a recent speech at wits university, qe will become appropriate when interest rates are at the zero lower bound and there is deflation risk. while inflation has eased and created space for lower rates, i am not aware of any professional analyst who projects deflation in south africa. our own sarb forecasts are in line with this consensus. 10 klaus schmidt - hebbel and martin carrasco, 2016, ‘ the past and future of inflation targeting : implications for emerging - market and developing economies ’, monetary policy in india. 11 klaus schmidt - hebbel and matias tapia, 2002, ‘ inflation targeting in chile ’, north american journal of economics and finance, 13, p. 125. nonetheless, should deflation take root, we would be prepared to deploy the tools at our disposal, as appropriate, to achieve our mandate. our inflation - targeting framework would help us make that decision, and would underpin the credibility of any steps we might need to take. in the current circumstances, however, we think that a qe programme doesn ’ t make much sense for south africa. some advocates of qe argue that it is a free way of financing government deficits. this is not true. the funds created to buy bonds would flow into the interbank money market, lowering the cost of funding. this cost of funding is in fact the repurchase rate ( repo rate ), which is our main monetary policy tool. to ensure that the repo rate stays where the mpc wants it, despite the extra funds in the system, we would have to borrow those funds back ourselves, which could be costly. to repeat : qe would not be ‘ free money ’. nonetheless, there are still claims that qe could work because the sarb could buy long - term bonds at a high interest rate, in the region of 9 %, and then pay sterilisation costs

christine lagarde : ecb press conference - introductory statement introductory statement by ms christine lagarde, president of the european central bank, and mr luis de guindos, vice - president of the european central bank, frankfurt am main, 18 july 2024. * * * good afternoon, the vice - president and i welcome you to our press conference. the governing council today decided to keep the three key ecb interest rates unchanged. the incoming information broadly supports our previous assessment of the medium - term inflation outlook. while some measures of underlying inflation ticked up in may owing to one - off factors, most measures were either stable or edged down in june. in line with expectations, the inflationary impact of high wage growth has been buffered by profits. monetary policy is keeping financing conditions restrictive. at the same time, domestic price pressures are still high, services inflation is elevated and headline inflation is likely to remain above our target well into next year. we are determined to ensure that inflation returns to our two per cent medium - term target in a timely manner. we will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim. we will continue to follow a data - dependent and meetingby - meeting approach to determining the appropriate level and duration of restriction. in particular, our interest rate decisions will be based on our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission. we are not pre - committing to a particular rate path. the decisions taken today are set out in a press release available on our website. i will now outline in more detail how we see the economy and inflation developing and will then explain our assessment of financial and monetary conditions. economic activity the incoming information indicates that the euro area economy grew in the second quarter, but likely at a slower pace than in the first quarter. services continue to lead the recovery, while industrial production and goods exports have been weak. investment indicators point to muted growth in 2024, amid heightened uncertainty. looking ahead, we expect the recovery to be supported by consumption, driven by the strengthening of real incomes resulting from lower inflation and higher nominal wages. moreover, exports should pick up alongside a rise in global demand. finally, monetary policy should exert less of a drag on demand over time. the labour market remains resilient. the unemployment rate was unchanged, at 6. 4 per cent in may, remaining at its lowest level since the start