Johannesburg - The South African Reserve Bank has time to wait before its next interest rate move due to a lower forecast for inflation, Deputy Governor Daniel Mminele said.
The more benign projected inflation path allows the bank “some room to pause in its interest-rate normalisation process”, Mminele said on Tuesday in the capital, Pretoria. “The condition of data-dependency continues to apply.”
The Reserve Bank has kept its benchmark interest rate unchanged since raising it to 5.75 percent in July. Falling oil prices has pushed inflation down to the lowest level since April 2011 and the central bank has cut its forecast for this year to 3.8 percent from 5.3 percent.
The central bank is aware “of how the oil price decline has significantly changed the near-term inflation outlook”, Mminele said. The “longer-term impact on both growth and inflation will depend on how persistent the decline is”.
The rand remains a major factor of uncertainty and the persistent gap in the current account, the broadest measure of trade in goods and service, could cause further depreciation, Mminele said.
Power shortages are restricting the benefit of falling oil prices and will cause doubt over economic growth during the next few years, Mminele said.
Africa’s second-largest economy expanded at the slowest pace last year since a 2009 recession, according to the Statistics Office. Eskom Holdings SOC Ltd, the state-owned utility that generates about 95 percent of the nation’s electricity, began implementing rolling blackouts last month as it struggles to meet demand.
Bloomberg