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Marcus: weaker rand key inflation risk

The depreciation of the rand in response to global risk aversion has become the main upside risk to the domestic inflation outlook‚ Reserve Bank Governor Gill Marcus says.

In a note within the bank's annual report‚ released on Wednesday‚ Marcus said that oil no longer posed as much of a threat on the inflation outlook as it did a few months ago. The price of international crude oil prices has eased in recent weeks in line with other commodity prices.

Central bank govenor Gill Marcus. Photo: Mxolisi Madela. Credit: Independent Newspapers

Inflation came in lower than expected in May at 5.7%‚ leading analysts to forecast lower-for-longer interest rates.

Marcus said inflation was now expected to remain within the target range on a sustained basis over the forecast period ending 2014.

Domestic demand pressures on inflation were tame‚ Marcus said‚ adding that evidence of this was in the “well-contained” core inflation measures.

The central bank's lending rate has remained unchanged at 5.5% since November 2010. The Monetary Policy Committee (MPC) will meet again on July 17‚ and announce its interest rate decision on July 19. - I-Net Bridge

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