JOHANNESBURG - The South African Reserve Bank (SARB) has kept interest rates unchanged at a benchmark rate of 6.75%.
But the Reserve Bank warns of possible increases later in the year if the Middle East war drives up inflation.
Reserve Bank Governor Lesetja Kganyago said the Bank is navigating a highly uncertain global environment, with world economies facing the shock caused by the conflict in the Middle East.
Kganyago cautioned that the longer-term outlook is less clear.
Inflation stood at 3% for February with core inflation also at 3%. This meets the revised SARB target.
“Higher energy prices will raise inflation in the near term. We expect headline will soon accelerate to around 4% with fuel inflation over 18% for the second quarter.
"Our baseline forecast then has a gradual unwinding of the shock taking inflation back to 3% late next year,” Kganyago said.
At this stage it is obvious that global inflation will be higher in the near term while growth will probably suffer from supply chain disruptions and rising costs.
“The fact is, we are still only a few weeks into the crisis. The coming months will be crucial for assessing the longer-term inflation consequences. Given current forecasts, we see inflation risks to the upside.”
Against this backdrop the Monetary Policy Committee (MPC) decided to keep the policy rate unchanged at 6.75%.
Decisions will continue to be taken on a meeting-by-meeting basis, with careful attention to the outlook, data outcomes and balance of risks.
The next MPC rates announcement will take place on 28 May.