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SARB's comments on interest rates

Johannesburg - Below are comments from South African Reserve Bank Governor Gill Marcus regarding her latest decision to keep the key repo rate unchanged 5.5%.

INFLATION

Reserve Bank governor Gill Marcus. Photo: Simphiwe Mbokazi. Credit: Independent Newspapers

“While the most recent inflation forecasts suggest marginal improvements in the medium term, upside risks to the inflation outlook persist despite the recent appreciation of the rand, which remains vulnerable to shifts in global risk sentiment and adverse domestic developments.”

“The Monetary Policy Committee is acutely aware of the policy dilemma of rising inflation pressures in a subdued economic growth environment. Despite a marginal improvement in the medium term inflation forecast, the trajectory remains uncomfortably close to the upper end of the target range. The main upside risk to the forecast continues to come from the exchange rate, which, despite the recent relative stability, remains vulnerable to global rebalancing.”

OUTLOOK

“The domestic economic outlook remains subdued amid continued strikes in the platinum sector and uncertainty regarding a stable and sufficient electricity supply in the coming months.”

GROWTH

“Economic growth is expected to remain below potential of 3 and 3.5 percent in 2014 with a consequent widening outward gap. The bank's forecast for economic growth has declined marginally to 2.6 percent in 2014 compared with 2.8 percent previously, while the forecast for 2015 has been revised down from 3.3 percent to 3.1 percent. The risks to this forecast are seen to be on the downside given the protracted strikes in the platinum sector and electricity supply constraints.”

RAND

“The rand is also vulnerable to domestic idiosyncratic factors, including protracted work stoppages, electricity supply constraints, and the slow adjustments of the current account deficit.” - Reuters

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