The IMF's economists have given SA's monetary policy the thumbs up but fiscal policy the thumbs down. Remember the days when every time the rand crashed, inflation rocketed, forcing the Reserve Bank to respond with steep interest rate hikes? These days, a weaker rand doesn't have nearly the same effect on prices - indeed, as an IMF working paper published last week notes, what economists call the "pass-through" effect of exchange rate movements to inflation fell from 70% to just 20% between 1994 and 2014, and it was in the 15 years after inflation targeting was introduced in 2000 that the real decline came. The economists sought to establish empirically whether there was a link and it turned out that the key reason for the reduced pass-through was the credibility of monetary policy. In other words, when economic actors such as businesses and trade unions believe the central bank will act to curb inflation, they don't respond to a weaker rand and higher import prices by driving up pr...

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