Johannesburg - SA Reserve Bank governor Gill Marcus has announced that the central bank has decided to keep its repo rate unchanged at 5.0%.
Below are comments from South African Reserve Bank Governor Gill Marcus on the Monetary Policy Committee's interest rate decision on Thursday.
“The risk to the inflation outlook remains on the upside due in large part to continued exchange rate and wage cost pressures.
“The inflation forecast of the Bank reflects a further deterioration in the inflation outlook for 2013 compared with the previous forecast.
“Having averaged 5.6 percent in 2012, inflation is now expected to average 5.8 percent in 2013, and 5.2 percent in 2014 compared with previous forecasts of 5.5 percent and 5.0 percent for the respective years.
“Inflation is expected to peak at 6.1 percent in the third quarter of 2013 and then to moderate gradually to 5.1 percent in the final two quarters of 2014. This deterioration is largely due to higher expected food price inflation, the lagged effects of the depreciation of the rand and higher expected unit labour costs.”
“Domestic economic growth remains fragile and below potential following an annualised growth rate of 1.2 percent in the third quarter of 2012 and an estimated growth rate of around 2.5 percent for the year.
“A similar outcome is expected in 2013 with growth of 2.6 percent forecast, revised down from 2.9 percent in the previous forecast.
“A more favourable outcome of 3.8 percent is forecast for 2014, compared with 3.6 percent previously, driven in part by a more favourable global outlook.
“However, the risks to these forecasts are assessed to be on the downside, given uncertainties and instability in parts of the mining and agricultural sectors in particular.”
“The rand exchange rate continues to pose an upside risk to the inflation outlook.
“The exchange rate has been impacted by the widening deficit on the current account on the balance of payments in 2012 and changing global and domestic risk perceptions particularly relating to the adverse developments in the South African labour market and the downgrades by the various ratings agencies.” Reuters