Marcus: weaker rand key inflation risk

Cape Town. 100219. South Africa is coming out of its first recession in almost two decades reasonably rapidly, says Reserve Bank Governor Gill Marcus. Marcus also said monetary policy remains directed towards containing inflation. The central bank has cut rates by 500 basis points since December 2008, and left the repo rate flat at 7,0% at its last four meetings. Picture Mxolisi Madela

Cape Town. 100219. South Africa is coming out of its first recession in almost two decades reasonably rapidly, says Reserve Bank Governor Gill Marcus. Marcus also said monetary policy remains directed towards containing inflation. The central bank has cut rates by 500 basis points since December 2008, and left the repo rate flat at 7,0% at its last four meetings. Picture Mxolisi Madela

Published Jul 4, 2012

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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.

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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