Playing Monetary Hawk and Dove Games at the Economy’s Peril

SOUTH AFRICA - Report 27 Jul 2015 by Iraj Abedian
On July 23, 2015, the monetary authority of South Africa voted to increase the repo rate by 25 basis points. Such a move can be construed as a confirmation that the South African Reserve Bank has kept to its long-held assertion that it had embarked on an interest rate hiking cycle. Apparently, the South African Reserve Bank is worried that second round effects of inflation – as captured by the trend in core inflation (see Graph 1) – could soon get out of control. US monetary policy normalization poses a threat of imported inflation (see Market Brief of July 23, 2015 “The benchmark rate goes...

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