RICARDO SMITH: Getting inflation rate to governor’s liking will take a bit of work
Lower nominal growth in wages, revenue and wealth over the short term will not be well received
The Reserve Bank’s monetary policy committee (MPC) decided to keep interest rates unchanged (https://www.businesslive.co.za/bd/economy/2024-07-18-reserve-bank-keeps-repo-rate-steady-at-825/), with four of the members voting for a flat policy regime and the remaining two preferring a 25 basis point cut. This is despite the headline inflation print coming in below the MPC’s upper-bound target of 6% for the past 12 months straight.
Notwithstanding the MPC’s inflation target of 3%-6%, in the past, expectations were anchored on the upper end of 6%. However, increasingly the governor has shifted focus to the midpoint of 4.5%. Furthermore, there has been talk of an even lower inflation target...
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