Share

Oil price a worry but rates kept steady

Pretoria - The South African Reserve Bank left the repo rate unchanged at 5.5% on Thursday as expected, saying the outlook for inflation was marginally lower than at its previous policy meeting while the outlook for domestic growth was slightly more favourable.

All 24 economists polled by Reuters last week expected the bank’s monetary policy committee to keep the repo rate, at which it lends to commercial banks, at three decade lows, with 12 economists seeing no change throughout 2012.

The central bank has kept rates unchanged for 16 months after cutting them by 650 basis points in total over a two-year period ending in November 2010.

“The main upside risk to inflation is seen to emanate from global oil prices, and while food price inflation is expected to moderate in the short run, the longer-term risks remain,” Marcus told a press conference.

“While the main pressures on inflation are of a cost push nature, there is some evidence that these pressures may be becoming more broad-based."
 
The Bank's forecast for core inflation is expected to peak at an average of 5.4% in the final quarter of 2012. 

Most analysts expect the next adjustment in rates to be upwards, with some seeing this towards the end of this year, while the rest think tightening will resume in early 2013.

“Domestic economic growth remains constrained, but the improved performance of the economy in the fourth quarter of 2011, and some positive developments in the global economy indicate a slightly better outlook than previously expected," she said.

Gross domestic product is seen at 3.0% in 2012.

Rand less volatile

“The exchange rate is, as always, highly uncertain, but the risk posed to inflation in recent months has subsided somewhat given the less volatile, albeit uncertain, global environment,” said Marcus.

“The one uncertain factor is what will happen to the exchange rate. So, the assumption at this point at time is, as we’ve said, is for a slightly depreciated (figure), but it depends on what occurs.
“In the medium to longer term, the reasons for the capital flows into emerging markets have not gone away, and that will impact on exchange rates of emerging markets including South Africa.”

She added that the immediate threat to the global economy posed by the eurozone debt crisis "appears to have subsided somewhat, but significant risks remain."

“Despite the positive indications, the global outlook remains fragile amid doubts about the strength of the US recovery, a recession in Europe, the extent of a slowdown in China and higher international oil prices.”


We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
19.00
-0.5%
Rand - Pound
24.02
-0.5%
Rand - Euro
20.53
-0.3%
Rand - Aus dollar
12.37
-0.2%
Rand - Yen
0.13
-0.6%
Platinum
904.37
+0.8%
Palladium
1,014.65
+1.3%
Gold
2,205.79
+0.5%
Silver
24.61
-0.1%
Brent Crude
86.09
-0.2%
Top 40
68,281
+0.9%
All Share
74,458
+0.7%
Resource 10
57,014
+2.4%
Industrial 25
103,960
+0.7%
Financial 15
16,486
-0.2%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders