Inflation now under control even in the downside scenario, Bank models show
Reserve Bank discloses the scenarios it considered when deciding to cut interest rates in September
Inflation is set to remain close to the Reserve Bank’s target of 4.5%, declining to an average of just above 3% in a best-case scenario where the rand continues to strengthen over the next couple of years. This could potentially lead to a decrease of two percentage points in interest rates over the period.
In its latest Monetary Policy Review the Bank has disclosed the upside and downside scenarios it considered when it made its decision to cut interest rates in September. It makes it clear as it did in September that it regards the risks to its baseline forecasts as “balanced”, but the scenarios could raise fresh questions about whether it is keeping interest rates too restrictive — and whether its real intention is to get inflation right down to the level at which it can make a strong case for a lower target...
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