Counterparties increasingly tend to post collateral from their home country. This creates the risk of negative feedback loops at country level, with a higher perceived credit risk causing a drop in asset valuation and strains in the funding of local banks. BIS central bankers’ speeches  5  Allow me to summarise the discussion so far.
Inflation  Starting with inflation, a central banker, like Münchau’s nameless interlocutor, might consider high inflation and low growth to be an impossible combination because weak demand alleviates price pressures. If firms lack for customers, they are unlikely to raise prices and scare off buyers. There is substantial evidence that demand has moderated in South Africa. Credit growth has been subdued.