Davos - South Africa's Reserve Bank will wait to see the second-round effects of the sharp drop in oil prices before making a policy response, said governor Lesetja Kyanyago.
"The position we are taking is that in the same way that when the oil price goes up, you want to see through the cycle, you want to see second round effects kicking in before you can take any policy response, the same must be applied when the oil price goes down," Kganyago told Reuters TV in Davos.
The South African Reserve Bank will hold its first Monetary Policy Committee (MPC) meeting for 2015 next week.
Interest rates likely unchanged
The key question is whether Kganyago can maintain his stance that South Africa was in a rate hiking cycle, said Nomura emerging markets economist Peter Attard Montalto.
Writing in the investment and financial service’s company's Sarb preview, Montalto said the expectation was that the MPC would keep the rates unchanged at 5.75% this month. The committee meeting is scheduled next week to run from Tuesday to Thursday, January 27 to January 29.
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Stats SA said the consumer price inflation (CPI) dropped to 5.3% in December 2014 from 5.8% in November 2014.
Petrol and food prices, which are key drivers of changes in the CPI, both showed lower annual inflation rates, according to Stats SA.
This will also have an impact on the MPC meeting.
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