THE end of the cycle of rising short-term interest rates in SA that began in January 2014 is, thankfully, in sight. Given the continued weakness of demand for goods and services, it will take the assumption of a more or less stable rand, at about current exchange rates, to bring inflation and forecasts of inflation in 2017 well below the upper 6% band of the inflation targets.The Reserve Bank model of inflation has reduced its estimate of inflation in December 2016 to 7.1% from its May forecast of 7.3%. The Bank, which was predicting a gradual decline in headline inflation in 2017, has reduced its central estimate of inflation in December 2017 at 5.5%. The Reserve Bank has revised lower its already weak GDP growth forecasts. It is forecasting no growth in 2016 (previously 0.6% a year) and an anaemic 1.1% a year. GDP growth in 2017 compared to 1.3% a year estimated previously. Our own exercise in simulating the Reserve Bank forecasting model using current exchange rates has generated...
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