South Africa holds at 5¾% amid ‘stubborn inflation,’ ‘sluggish growth’

By Susanna Moon

Chicago, Sept. 18 – South African Reserve Bank’s Monetary Policy Committee said it decided to keep the repurchase rate unchanged at 5¾% at its meeting on Thursday. The bank last increased the rate by 50 basis points on Jan. 30.

The path of inflation remains “uncomfortably close to the upper end of the target range” but that the outlook had looked up somewhat even as the country’s economic growth outlook has weakened further, according to a bank notice.

The bank said that interest rates “will have to normalize over time” but that it held the rate steady amid the better inflation outlook along with the downside risks to the weak growth outlook.

The consumer price index for all urban areas was 6.4% in August, after clocking in at 6.6% in June and 6.3% in July 2014.

The higher turnout was mainly due to higher-than-expected food prices, the bank noted. Core inflation, which excludes food, petrol and electricity, rose to 5.8% from 5.7% in July.

Worldwide, there has been more financial market volatility amid concerns about the timing and extent of the U.S. monetary policy, the bank noted.

“The combination of stubborn inflation and a sluggish growth outlook continues to pose a difficult dilemma for monetary policy,” the bank said.

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