EDITORIAL: Tackle inflation but take care with the tightening
The ‘higher for longer’ interest rate scenario in the US has become increasingly likely
After the Reserve Bank’s monetary policy committee delivered a “hawkish hold” on Thursday, the question is what’s next. That could depend as much on what major central banks do globally as it does on SA’s own inflation dynamics. While most economists now believe SA’s interest rates have peaked, rate cuts are not expected before 2024, and possibly only late next year.
The Bank’s decision came in a week in which the US Federal Reserve (Fed) held rates but made hawkish noises. The models suggest it could hike rates again in 2023 if inflation pressures do not abate. The “higher for longer” scenario has become increasingly likely. The Fed’s hawkish comments prompted US government bond yields to climb to multidecade highs. Similar signals came from other advanced country central banks such as the Bank of England, which have left the door open for further rate rises if inflation doesn’t subside fast enough...
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