But there are limits to how flexible we can be. We acknowledge that inflation has been rising recently in response to supply shocks. South Africa has been suffering from a severe drought, which has so far pushed food prices 11 per cent higher than they were in the middle of last year.
We are also seeing the effects of sustained currency depreciation, with the rand losing about half its value against the US dollar over the period May 2013 to July 2016. Our forecasts, and our experience, suggest that shocks of this scale pass through into prices and wages more generally and over time, accelerating both inflation and unemployment. This would have been an unacceptable outcome.