However, historical comparisons of nominal rates can be misleading. In 1980 the inflation rate was around 14 per cent, implying a strongly negative real interest rate. Currently, although real interest rates have come down with the successive reductions in nominal rates, they are still significantly positive.
In December the repo rate was reduced by 50 basis points, despite the fact that the market consensus was that the reduction would be 100 basis points or more, with further reductions forecast for the subsequent meeting. It is perhaps important to explain why the MPC decision was not in line with market expectations.