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‘Subdued economy contains inflation’

Economy

Pretoria - Hesitant growth in South Africa's economy is expected to contain inflation, Deputy Reserve Bank Governor Daniel Mminele said on Thursday, suggesting interest rates will remain at a historic low of 5.5 percent for the rest of the year.

“The moderate pace of 'core' inflation shows that despite some evidence of price pressures becoming more broad-based, these are still expected to remain contained by the relatively subdued state of the domestic economy,” told bankers in Pretoria.

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The central bank had been expecting inflation to peak at 6.6 percent this year - above a 3-6 percent target band - but has trimmed that projection to 6.5 percent in light of lower-than-expected CPI prints.

Headline inflation stood at six percent in March.

Governor Gill Marcus said on Monday inflation should come back into the bank's 3-6 percent target range by year-end “on a sustainable basis”.

Mminele reiterated that despite volatility in the exchange rate of the rand, the Reserve Bank would not target a specific level for the currency, and would continue to build reserves when conditions were right. - Reuters

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