South African inflation is expected to remain within its 3-6 percent target range on a sustained basis to the end of 2014, with the main upside risk coming from falls in the rand due to investor risk aversion, the Reserve Bank said on Wednesday.
In its 2011/12 annual report, the central bank reiterated that the domestic growth outlook had deteriorated mainly due to global uncertainties, saying it had trimmed its forecasts.
While oil was previously seen as the main upside risk to the inflation outlook, the depreciation of the rand in response to global risk aversion had more recently become the main upside risk, it added.
The local banking system remained stable and well capitalised, it said, despite the liquidity problems facing some European countries. South African banks also had minimal exposure to peripheral euro zone economies, it added.
The bank said it was continuing a policy of building reserves to try to bring greater stability to the foreign exchange market and had purchased approximately $4 billion of foreign exchange in the financial year under review. - Reuters