On the other hand, this will likely be more than offset by higher import prices as a result of the depreciation of the rand since May. May. Ironically, this would be in line with the depreciation seen during the previous crisis in early 1996. Their effect is currently more subdued. The internationalisation of the South African economy is now deeper, and foreign competition is more intense. Hence, pricing leverage is likely to be constrained.
Headline inflation is more difficult to forecast, as it is heavily influenced by mortgage rates.
Comments by Dr. Stals yesterday, during one of his regular briefings to the parliamentary Finance committee on the state of the economy, were quite hawkish. He Highlighted the importance of maintaining a restrictive monetary policy to offset the effects of the weak currency. That said, he also suggested that the outlook on interest rates depends on whether financial stability can be restored. This memorandum is based on information generally available to the public from sources believed to be reliable. No representation is made that it is accurate or complete.