Reading the Reserve Bank's monetary policy committee (MPC) statement this week sent me flashbacks of sitting in a lecture hall in the Shepstone building of the then University of Natal, with a young and rather bright-eyed Adrian Saville waxing lyrical about the relationship between inflation and interest rates. I can almost hear him say: "When interest rates are lowered, more people are able to borrow more money, and that means more consumers have more money to spend, causing the economy to grow. Goods and services are in demand, and inflation increases. The opposite happens when interest rates rise. Consumers borrow less, the economy slows down, demand for goods and services slows and inflation decreases."

Back then, my friends and I could recite this in our sleep, notwithstanding that we had no clue what it meant. Until now.

BL Premium

This article is reserved for our subscribers.

A subscription helps you enjoy the best of our business content every day along with benefits such as exclusive Financial Times articles, Morningstar financial data, and digital access to the Sunday Times and Times Select.

Already subscribed? Simply sign in below.



Questions or problems? Email helpdesk@businesslive.co.za or call 0860 52 52 00.