While there are at this stage no indications of a broadbased, sharp acceleration in wages as a result of recent protests, the Reserve Bank will have to carefully monitor possible spillovers of any such development into prices and price expectations. We have already seen an impact on the exchange rate of the rand, which almost touched R9.00 against the USD about a week ago.
The rand appears to have decoupled from the EURUSD movements, taking its cue instead from domestic developments, including the credit rating downgrades, widespread strike action and the current account deficit. Growth forecasts will most likely need to be revisited. As for the recent actions by rating agencies, these were obviously unfortunate and disappointing developments.