Share

Rand weakness biggest inflation risk

Pretoria - South African inflation is expected to remain within its 3%-6% target range on a sustained basis to the end of 2014, with the main upside risk coming from falls in the rand due to investor risk aversion, the Reserve Bank said on Wednesday. 

In its 2011/12 annual report, the central bank reiterated that the domestic growth outlook had deteriorated mainly due to global uncertainties, saying it had trimmed its forecasts.

“The global environment continues to provide an uncertain, unstable and risky backdrop against which price and financial stability in the domestic economy have to be maintained,” Governor Gill Marcus said in a statement accompanying the report.

The Reserve Bank has kept its repo rate unchanged at 5.5% since November 2010 to try and boost economic growth, which it now sees at 2.9% in 2012 from an earlier forecast of 3%.

The Treasury sees growth at 2.7% this year.

Inflation has slowed to within the central bank’s 3%-6% target range, hitting 5.7% year-on-year in May from 6.1% in April and raising expectations the central bank may have room to cut interest rates this year.

While oil was previously seen as the main upside risk to the inflation outlook, this year’s depreciation of the rand in response to global risk aversion had more recently made currency weakness the main upside risk, the Bank said on Wednesday.

The rand hit a three-year low of R8.71 against the dollar last month on global fears of contagions from debt problems in the eurozone, South Africa’s biggest trading partner bloc.

However, it has since rallied, towards the psychologically key R8.0 level against the dollar.

South Africa's banking system remained stable and well capitalised with minimal exposure to peripheral eurozone economies, the Reserve Bank added.

The Bank also said it was continuing a policy of building reserves to try and contribute to greater stability in the foreign exchange market and had purchased approximately $4bn of foreign exchange in the financial year under review.

The Bank has repeatedly said it does not target a level for the currency since trying to influence the exchange rate would be too costly.

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
18.98
-0.2%
Rand - Pound
24.06
+0.2%
Rand - Euro
20.58
+0.1%
Rand - Aus dollar
12.35
+0.6%
Rand - Yen
0.13
+0.7%
Platinum
902.95
+0.1%
Palladium
998.75
-0.7%
Gold
2,153.35
-0.3%
Silver
24.91
-0.6%
Brent Crude
86.89
+1.8%
Top 40
65,825
-0.6%
All Share
72,043
-0.5%
Resource 10
53,031
-0.5%
Industrial 25
99,434
-1.0%
Financial 15
16,625
+0.0%
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