Term:CENTRAL BANK [SARB]

A government or quasi-governmental organization that manages a country’s monetary policy. For example, the U.S. central bank is the Federal Reserve, and the ECB (European Central Bank) manages monetary policy for the European Union. In South Africa the central bank is known as the Reserve Bank. It has two primary functions – to ensure monetary stability (which basically means controlling inflation) and to maintain the growth of the economy. These two objectives are to some extent mutually exclusive in that efforts to control inflation (such as increasing interest rates) inevitably result in a reduction in economic growth. To achieve its objectives the Reserve Bank holds a monetary policy committee (the MPC) meeting every two months to consider whether interest rates should be increased, decreased or left unchanged.

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