Why do you hike rates when oil is falling, the rand is rallying, there is no pass-through from the recent weakness of the rand and there is no evidence of second-round effects from the April VAT increase? This was the response of many foreign investors after the November monetary policy committee meeting and its 25-basis point rate hike. Bemusingly, the sentiment above was apologetically caveated with a “we still know the SA Reserve Bank is one of the most credible central banks in the world, but ....” The Bank is indeed one of the most credible central banks in terms of an inflation-targeting framework, a depth of research staff and forecast and publication transparency. Its problem, however, is that the complexity of its quarterly projection model operation, and with it a view of a balance between various "gaps" in the economy — gaps of things like growth, the currency, inflation, the current account and finally interest rates, with equilibrium levels — has basically lifted off in...

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