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Johannesburg - South African Reserve Bank (Sarb) governor Gill Marcus has expressed major concern over wage settlements that are putting pressure on the already deteriorating outlook for inflation and the economy.
Marcus announced on Thursday that the repo rate will remain at 5%.
The rand edged up 0.61% at R9.5136 after the announcement, following a fall by as much as 13c to the dollar in early trade reaching an intraday worst level of R9.6920/$ and R12.4875/€.
The repo rate is the interest rate at which the Sarb lends money to commercial banks.
The factors influencing the decision were:
Inflation
"Inflation is now expected to average 0.1 percentage points lower in 2013 and 2014 at 5.8% and 5.2%, respectively, and to average 5.0% in 2015.
"A temporary breach of the upper end of the target range is still expected in the third quarter of 2013, but at a lower average level of 6.1% (6.3% previously).
"The slight improvement is due to changed assumptions about international commodity prices, including oil, and lower global inflation.
"Given the current unsettled environment in the economy, the MPC assesses the risks to inflation to be on the upside, while many of the above factors contribute to a downside risk to growth."
Growth
"Domestic growth prospects remain fragile amid low consumer confidence, continued output disruptions in the mining sector, electricity supply constraints and a weak global environment.
"The growth forecast of the bank has been revised down from 2.7% to 2.4% for 2013, and from 3.7% to 3.5% in 2014.
"Growth is expected to accelerate to 3.8% in 2015. At these growth rates, the negative output gap will widen further before stabilising next year, and begin to close during 2015.
"Given the difficult labour relations environment in the country and the risks to global growth, the downside risk to growth remains, as does the possibility of increased job losses."
Wages
"The (Monetary Policy Committee) MPC is increasingly concerned about the prospect of (wage) settlements well above inflation and productivity growth and the risk of protracted and disruptive strike action, with negative implications for growth and exports."
"At a time of high and rising unemployment and slowing growth the imperative of an economy-wide commitment to wage and salary restraint at all levels, including executive pay, cannot be over-emphasised."
Outlook
"The MPC is increasingly concerned about the deteriorating outlook for the South African economy. There are a number of critical domestic issues that are contributing to the vulnerability of the economy that need to be urgently addressed.
"These include the financing of the deficit on the current account of the balance of payments, the fractious labour relations environment and the associated risks of protracted work stoppages and excessive wage increases."
Marcus announced on Thursday that the repo rate will remain at 5%.
The rand edged up 0.61% at R9.5136 after the announcement, following a fall by as much as 13c to the dollar in early trade reaching an intraday worst level of R9.6920/$ and R12.4875/€.
The repo rate is the interest rate at which the Sarb lends money to commercial banks.
The factors influencing the decision were:
Inflation
"Inflation is now expected to average 0.1 percentage points lower in 2013 and 2014 at 5.8% and 5.2%, respectively, and to average 5.0% in 2015.
"A temporary breach of the upper end of the target range is still expected in the third quarter of 2013, but at a lower average level of 6.1% (6.3% previously).
"The slight improvement is due to changed assumptions about international commodity prices, including oil, and lower global inflation.
"Given the current unsettled environment in the economy, the MPC assesses the risks to inflation to be on the upside, while many of the above factors contribute to a downside risk to growth."
Growth
"Domestic growth prospects remain fragile amid low consumer confidence, continued output disruptions in the mining sector, electricity supply constraints and a weak global environment.
"The growth forecast of the bank has been revised down from 2.7% to 2.4% for 2013, and from 3.7% to 3.5% in 2014.
"Growth is expected to accelerate to 3.8% in 2015. At these growth rates, the negative output gap will widen further before stabilising next year, and begin to close during 2015.
"Given the difficult labour relations environment in the country and the risks to global growth, the downside risk to growth remains, as does the possibility of increased job losses."
Wages
"The (Monetary Policy Committee) MPC is increasingly concerned about the prospect of (wage) settlements well above inflation and productivity growth and the risk of protracted and disruptive strike action, with negative implications for growth and exports."
"At a time of high and rising unemployment and slowing growth the imperative of an economy-wide commitment to wage and salary restraint at all levels, including executive pay, cannot be over-emphasised."
Outlook
"The MPC is increasingly concerned about the deteriorating outlook for the South African economy. There are a number of critical domestic issues that are contributing to the vulnerability of the economy that need to be urgently addressed.
"These include the financing of the deficit on the current account of the balance of payments, the fractious labour relations environment and the associated risks of protracted work stoppages and excessive wage increases."
