o told Parliament's Standing Committee on Finance thatFor more financial news, go to the Reserve Bank governor Lesetja Kganyago gave MPs a spirited defence of his policy to continue hiking rates amid criticism that this is not taming inflation.
The bank hiked rates by another 50 basis points in May, bringing the increase to 4,75 percentage points since November 2021. He has been criticised by economists who argue that higher rates are not bringing down inflation, which is due to rand depreciation, and are killing growth. We take no pleasure in people losing houses, but the fact of the matter is that inflation is eroding people's incomes, and something must be done.
In the case of SA, the bank considers prices of inputs such as fuel, food, and electricity to be"exogenous" and not a result of the business cycle. However, when other price setters in the economy raise prices in response to higher input costs,"second round effects" kick in, and inflation of items excluding exogenous factors start to rise.