Is SARB Forex Intervention Regulating Base Money?

An update on Reserve Bank policy from the ETM Macro Strategy team:

“The increase of deposits with the SARB from Jan to Feb took the reserve requirement ratio (SARB Deposits/TMS) of the commercial banking system from 3.7% to 3.95%, the highest in over 10 years. During the boom credit years from 2002 to 2006, the reserve ratio averaged 3.2%. This means there is potential for still strong credit growth even if the SARB withdraws more base money in coming months. In fact if banks were to restore the reserve ratio to 3.2% it would mean they could still pyramid R500 billion worth of new loans on top of the existing credit structure. That’s an additional 25% credit growth. Technically bank lending is unconstrained.”

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