The outflow of capital from the bond market by foreign investors since the start of the year, which came in response to heightened global and domestic risk, has raised the cost of government borrowing. This is the first time that MPs have called the Reserve Bank to Parliament to discuss the financial stability report, which highlighted how new threats – such as secondary sanctions in response to SA's relationship with Russia, loadshedding and greylisting – had raised SA's risk profile and threatened financial stability. Failure to do that will mean that the incomes of SA will continue to be eroded.' 'With respect to my fellow economists who hold a different view to the central bank: I am sorry - inflation has spread beyond the headline, we have seen core inflation rising and second-round effects kicking in, we are seeing inflation and. 'Once this happens, if you do not act, people will adjust their inflation expectations to a higher level, causing a wage-price spiral … That wage-price spiral sets in when the central bank fails to act decisively when there is an indication that inflation is starting to be broad-based. 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. In the case of South Africa (SA), the bank considers prices of inputs such as fuel, food, and electricity to be 'exogenous' and not a result of the business cycle. Kganyago said that while initially central bankers around the world had assumed that the reappearance of inflation was temporary, because it was caused by supply-side shocks - or shortages of particular goods due to Covid-19 disruptions – this had fed into other prices.

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