Governor Signals Less Concern About Overtightening Than About Acting Too Slow

Towards the end of his press conference, SARB Governor Lesetja Kganyago strongly suggested that it would be better for the central bank to overtighten monetary policy than fail to act to curb inflation in time. Kganyago argued that undertightening creates the risk of losing monetary policy credibility and "creates massive costs." However, "if you discover that you have overtightened, the correction is so swift."

• Deputy Governor Rashad Cassim spoke in a similar vein, emphasising that a failure to respond to price pressures would create a risk of having to take firmer action later on. Cassim said that it is a difficult balancing act for the SARB to avoid overtightening while containing inflation, but they think they have taken the right decision.
• Kganyago effectively deflected a question about whether the MPC considered a 75bp hike today. He answered that it was discussed, but "so was 50, so was 25, so was zero," with the MPC coming to the conclusion that a 50bp move was appropriate.
• The Governor was unfazed by the rand's reaction in the wake of the rate decision. He said that the MPC does not adjust monetary policy based on the exchange rate. In fact, it only considers the exchange rate insofar as it affects domestic inflation.
• Asked to clarify the nature of idiosyncratic factors weighing on the rand, Deputy Governor Fundi Tshazibana listed load-shedding, logistical constraints, weak growth and tensions surrounding a Russian ship that allegedly took on weapons from South Africa. Apart from that, MPC members have generally avoided discussing politics.