South Africa keeps rate at 5¾%, increases inflation forecast to 4.8%

By Angela McDaniels

Tacoma, Wash., March 26 – South African Reserve Bank’s Monetary Policy Committee unanimously decided to keep the repurchase rate unchanged at 5¾% given the uncertainties related to U.S. policy normalization and the weak state of the South African economy, according to a news release from the bank.

The committee said the near-term inflation outlook has deteriorated since its previous meeting with the partial reversal of recent gas price declines, emerging upside pressures on food and possible further electricity tariff increases.

The rand exchange rate has depreciated further, adding to upside inflation risks.

The South African economy, however, remains weak amid electricity supply constraints and relatively subdued domestic demand, the committee said.

The year-over-year inflation rate as measured by the Consumer Price Index for all urban areas was 4.4% in January and 3.9% in February.

According to the bank’s latest forecasts, inflation is now expected to average 4.8% in 2015, compared with the previous forecast of 3.8%.

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