In recent years, we have observed that the pass-through from depreciation to inflation seems to be lower than it used to be. Many of our fellow inflation-targeting central banks have reported the same observation. This suggests that we are reaping the rewards of playing the long game.
Since 2011, the South African economy has absorbed a 50 per cent depreciation of the currency without a major acceleration in inflation, and core inflation 4 has not exceeded 6 per cent. Then there’s the short game. The South African Reserve Bank is often asked if we make monetary policy decisions based on the exchange rate.