The current monetary control mechanism in South Africa, which was implemented on the recommendations of the De Kock Commission (1985), is one regulating the cost, rather than the availability of funds at the discount window. As some of the changes associated with the new mechanism were introduced during the early 1980s, and seeing that they were fully in line with the findings of the Commission in 1985, it can be argued that the current period in monetary control started with the appointment of De Kock as governor of the Reserve Bank in 1981. The new market-orientated policy attached great importance to the role of the Bank rate as monetary control instrument. It is found in this paper that following the gradual implementation of the current monetary control mechanism during the 1980s, the monetary authorities succeeded during the latter part of the 1980s to improve the correlation between the Bank rate and short-term market rates. This has resulted in a more stable pattern in the level and structure of market rates after 1985. The author carried out correlation and stability analyses, contrasting the period 1983-1992 with the period 1973-1992. The market interest rates included in the analysis are the prime overdraft rate, the bankers’ acceptance rate, the home mortgage rate, the long-term government bond rate, and the interest rate gap between the long-term Eskom Bond rate and the bankers’ acceptance rate. Bibliogr., notes, ref.
