The idea that a central bank should seek to restrict those developments in the financial system that threaten the health of the economy strikes a strong resonance today. The difference between today’s interpretation and that advocated by Mills and his colleagues is a subtle, but important, one.
Thirdly, accommodative policy stances in some developed countries resulted in positive interest-rate differentials for emerging market countries compared with their counterparties within the industrialised countries. This is still the case with respect to South Africa despite the overall reduction of 600 basis points in the repo rate since June 2003.