But in any case the desired outcome may not arise. Despite these complications, the Bank has a preference for a relatively stable and competitive level of the external value of the rand. Large movements in the exchange rate disrupt resource allocation and economic growth, while an overvalued exchange rate would disqualify deserving exporters from entering international markets on a sustainable basis.
For price stability to be maintained on a sustainable basis it is crucial that the high wage increases resulting from recent negotiations in some regions do not spread across the euro area, not least because this would have negative consequences for competitiveness, employment growth and consumption.