Committee hikes rate by 50 basis points while other central bankers show more restraint
Ronald Reagan described inflation “as violent as a mugger, as frightening as an armed robber and as deadly as a hitman”.
Meanwhile, inflation’s persistence in the US saw the Federal Reserve raise its rates by the same margin to 4.75%-5% on March 22. The Reserve Bank’s monetary policy committee saw their puny hikes and raised the stakes with a surprise 50 basis point hike last week. In broad terms, a strong dollar and tighter US monetary policy result in a credit crunch, slowing growth and sometimes tipping economies into recession. Emerging markets are particularly vulnerable.
It is not alone among emerging market central banks these days — several others have distinguished themselves in recent years, most notably Brazil and India. With SA, they got a lead on the rich world by raising rates at a time when their developed world counterparts were still calling inflation merely “transitory”.
Negative market reaction to such proposals is not a uniquely SA experience. Investors and business leaders alike looked on nervously in 2022 when then British prime minister Liz Truss spoke about reviewing the Bank of England’s mandate.
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