Recent improvements in the current account of the balance of payments, the firmer exchange rate of the rand, the increased inflow of foreign capital, and the rise in official foreign exchange reserves, provide sufficient evidence to the effect that the serious danger of a collapse in South Africa’s external economic relations a year ago has been successfully averted.
And because inflation is reflected in nominal interest rates, that, in turn, can reduce the amount of policy space the central bank has available to prevent the economy from slipping into recession. In fact, in recent years, central banks around the world have had to use a larger variety of policy tools than they have traditionally used to support the recovery.