The SARB decided to raise rates in July and November 2015 in order to prevent potential second-round inflationary effects from occurring and to anchor long-term inflation expectations, which remain uncomfortably close to or above the upper band of the inflation target. In general, risks to the inflation outlook for 2016 remain tilted to the upside and have recently deteriorated further.
Falling equity markets and softening house prices have put pressure on household balance sheets at a time when the ratio of debt to income is already at a record high of 140 per cent. The household debt-toasset ratio has risen as the credit crisis intensified, reaching 19 per cent at the end of the third quarter – the highest level since 1990.