the fact that south africa ’ s inflation has been below the inflation rates of the united states, the united kingdom and even germany, in recent months. perhaps more relevant, we have not seen target misses of the scale experienced by many of our peers, and unlike those countries, we have page - 6 - of 8 not had to raise rates well into restrictive territory. the sarb is not happy about our target breach, but given what is happening to the world, neither our inflation rate nor our interest rates look especially onerous. it ’ s actually a reasonable outlook, given the worst global inflation shock in a generation. my second observation is an historical comparison. a decade ago, during the global taper tantrum, south africa was one of the most - affected countries. for instance, we were included in the grouping known as the ‘ fragile five ’. in 2020, during the onset of the covid - 19 shock, south africa was once again identified as a vulnerable country. for example, adam tooze published a widely read essay in foreign policy describing the coronavirus as the ‘ biggest emerging market crisis ever ’, which included the claim that, and i quote, “ at the head of the list of vulnerable countries is south africa ”. this year ’ s financial market storm has hurt a wide range of countries. the experiences of the worst hit, like sri lanka, have reminded us once again that macroeconomic stability is precious. it ’ s striking, however, that of the fragile five from 2013, only one country, turkey, is in danger of an acute macroeconomic dislocation today. yes, south africa remains vulnerable to external shocks, and this keeps us awake at night. but south africa ’ s resilience during this stress episode is very welcome. we have benefitted from some good luck, mainly from higher commodity prices. in large part, the macroeconomic choices of the past few years have also reduced fragility. this reflects necessary fiscal policy decisions, especially around the public sector wage bill, as well as a prudent monetary policy. there are many accounts being written now of what central banks got wrong, that made the ongoing inflation surge possible. reading them, i realise that despite the criticisms – we at the sarb are sometimes attacked for not being adventurous – it is clear that when central banks do become adventurous the consequences can be even more unpopular. page - 7 - of 8 conclusion to conclude, looking back over the past – very exciting – three years

increases keep this from being a major source of pressure. set against these considerations, the good news is that oil prices seem to be easing again, and there is also some tentative progress on the food price front. we have a large gap currently between our headline and core inflation measures – 3 page - 5 - of 8 percentage points, with core at 4. 4 % and headline at 7. 4 %. if headline starts to move back towards core, we won ’ t have low inflation, but we will at least be closer to the midpoint of our target. even taking into account these moderating factors, we would still want to get back to ‘ normal ’ interest rates, but there would be less urgency to get there fast. on the whole, our policy stance remains accommodative. the 75 basis - point hike in july might have been the largest hike since 2002, but our starting point was very low, and the repo is still below the inflation rate. indeed, if you apply a simple taylor rule to the data, where the policy rate is a function of normal or neutral rates adjusted for deviations from the inflation target and full output, you will certainly get an outcome above 5. 5 %. this applies even when you are looking at next year ’ s inflation, past the 12 - month impact of the ukraine war price shock. let me conclude, by stepping back a bit to see the bigger picture. i ’ d like to offer two comparisons. the first has to do with south africa ’ s performance relative to other countries. it is still early days, and i don ’ t want to signal complacency, but given the size of the global shock underway, it is fortunate that south africa has a good chance of getting through this without particularly high inflation or high interest rates. our july qpm projection, which is a reasonable baseline, shows inflation peaking during the current quarter and then moving back towards our midpoint target during the rest of the forecast period. meanwhile, the qpm ’ s endogenous policy rate moves moderately higher, but the stance is never tight. for instance, the average repo rate is about the same as it was in the pre - covid period, when it was between 6 % and 7 % ; the qpm has repo averaging 6. 5 % next year and 6. 75 % in 2024. this compares well with what has happened in many other countries. i hope you have all taken time to appreciate