Rate hike projections overdone: Reserve Bank

In January, the bank raised the repo rate by 50 basis points to 5.5%.

Gill Marcus: The bank cannot not give unconditional commitments of future policy moves and can only indicate its assessment of risks. (Image SA Reserve Bank)

"Our recent statement in January stressed the fact that further action will be highly data dependent. The initial reaction to our decision was quite extreme," said the governor.

The governor was delivering an address to the Central Banks Communicators Conference Dinner on Thursday.

"I therefore indicated recently that I thought that the market expectation of a further 200 basis points increase over the coming year sounded overdone, and I still believe this to be the case. We also stressed that future moves are highly data dependent in the current circumstances of heightened uncertainty," she said.

At the first meeting of the year on interest rates, the central bank unexpectedly raised the repo rate. The repo rate - which is the scale at which the bank lends money to commercial banks - had up until January been unchanged at 5% since July 2012.

'A different situation'

The governor said some analysts have justified the initial market reaction on the basis of the previous tightening cycle in 2005 to 2008 of 500 basis points in two years.

"Today we have a very different situation, with the output gap being negative and subdued growth in both household consumption expenditure and credit extension," said Marcus, adding that the bank expects its monetary policy to be more moderate than the tightening cycle from 2006 to 2008.

"We would expect the monetary policy response to be more moderate given our concerns about slow growth in the economy."

Marcus said the bank could not give unconditional commitments of future policy moves and could only indicate its assessment of risks.

"We cannot give any unconditional commitments of future policy moves. At best we can indicate our assessment of the risks, but it is for the markets to do their own assessments.

"It also does not mean that there will be adjustments at every meeting or that if rates are increased, that they will be increased by the same amount. And if circumstances change, we will have to change our views," explained the governor.