The MPC has, however, shown caution in this hiking cycle – and has emphasised the importance of data dependency in making its decisions to ensure that the Bank’s response is calibrated to changing economic conditions. This approach has resulted in rates being hiked more gradually, and by a lower magnitude, than in previous hiking cycles in South Africa.
Consider the difference: from January 2002 the MPC increased the repo rate by 400 basis points over 16 months, whereas in the past 31 months we have increased the rate by 200 basis points. As a small open economy, South Africa is highly exposed to exogenous shocks that can affect inflation.