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Johannesburg – The South African Reserve Bank (Sarb) will be sensitive to the weak economy when considering further interest- rate increases, Governor Lesetja Kganyago said.
The Reserve Bank “remains committed to achieving its primary mandate of price stability but will continue to conduct policy in a manner that is sensitive to the fragile state of the economy,” Kganyago said on Friday in a speech at the bank’s annual general meeting in Pretoria.
The bank’s Monetary Policy Committee raised the benchmark repurchase rate by a quarter of a percentage point to 6% last week to fight rising prices even as the economy grew at the slowest pace last year since a 2009 recession.
Inflation accelerated to 4.7% in June. Consumer-price growth is forecast by the bank to breach the 6% upper limit of its target band in the first half of next year.
Wage settlements in excess of inflation, increasing food and electricity prices and the weakening rand are upside risks to price growth, Kganyago said. Core inflation, which excludes food, non-alcoholic beverages, gasoline and electricity costs, will remain close to the upper end of the central bank’s target range, he said.
The rand weakened 0.3% to R12.7404/$ at 10:24, taking its decline since the start of the year to 9.2%.
Power cuts by Eskom are hurting retailers and manufacturers in Africa’s most industrialised economy while falling global metal prices are hobbling mining in the gold- and platinum-producing nation.
“The outlook for the economy remains subdued,” Kganyago said. Load shedding is “expected to continue for some time,” he said.
The Reserve Bank forecasts economic growth of 2% this year and 2.1% in 2016.
