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Cape Town - The repo rate will remain at 5.5% for now, but SA Reserve Bank (Sarb) governor Gill Marcus promised of future hikes.
"We are saying there will be interest rate increases in future," said Marcus, adding that increments may not always be of the same magnitude.
However, she also pointed out that rate increases would not necessarily come at every meeting.
"We are dealing with an environment that is extremely uncertain."
"The challenge is the economy is fragile and it's not simply a question of what the central bank can do."
She said that domestic economic growth outlook remains subdued.
"Economic growth is expected to remain below potential of between 3.0% and 3.5% in 2014, with a consequent widening output gap."
Sarb's forecast for economic growth declined marginally from 2.8% to 2.6% in 2014. The forecast for 2015 was revised down from 3.3% to 3.1%.
"The risks to this forecast are seen to be on the downside, given the protracted strike in the platinum sector and electricity supply constraints," said Marcus.
She said the outlook for the mining sector remains bleak as output contracted at a month-on-month rate of 1.1% in January.
"The on-going strike in the platinum sector is likely to impact adversely on mining output and exports."
Marcus assured the country that the MPC is aware 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 is the exchange rate, which remains vulnerable to global and domestic sentiment, she said.
These include protracted work stoppages, electricity supply constraints, and the slow adjustment of the current account deficit.
- Fin24
"We are saying there will be interest rate increases in future," said Marcus, adding that increments may not always be of the same magnitude.
However, she also pointed out that rate increases would not necessarily come at every meeting.
"We are dealing with an environment that is extremely uncertain."
"The challenge is the economy is fragile and it's not simply a question of what the central bank can do."
She said that domestic economic growth outlook remains subdued.
"Economic growth is expected to remain below potential of between 3.0% and 3.5% in 2014, with a consequent widening output gap."
Sarb's forecast for economic growth declined marginally from 2.8% to 2.6% in 2014. The forecast for 2015 was revised down from 3.3% to 3.1%.
"The risks to this forecast are seen to be on the downside, given the protracted strike in the platinum sector and electricity supply constraints," said Marcus.
She said the outlook for the mining sector remains bleak as output contracted at a month-on-month rate of 1.1% in January.
"The on-going strike in the platinum sector is likely to impact adversely on mining output and exports."
Marcus assured the country that the MPC is aware 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 is the exchange rate, which remains vulnerable to global and domestic sentiment, she said.
These include protracted work stoppages, electricity supply constraints, and the slow adjustment of the current account deficit.
- Fin24
