“The MPC [monetary policy committee] is aware that some of the favourable factors that contributed to this decision could reverse quickly,” governor Lesetja Kganyago said.
“It remains ready to respond appropriately to any significant change in the inflation outlook.
Although inflation is running higher than the bank’s 3%-to6% target – the consumer price index (CPI) rose 6.3% last month, Wednesday’s report showed – the outlook for economic growth has weakened.
The bank now expected CPI inflation to average 6.6% this year, Kganyago said yesterday, from an earlier forecast of 6.7%, while the forecast for next year was revised to 6% from 6.2% and for 2018 to 5.5% from 5.2%.
The bank now sees inflation peaking at 7.1% in the fourth quarter this year.
Food inflation is expected to peak at 12%, also in the fourth quarter.
The economy contracted 1.2% in the first quarter, and the International Monetary Fund’s latest projections for the year put growth at just 0.1%.
Yesterday, the bank revised its projection for growth this year to 0% from 0.6%.
It puts growth next year at 1.1%, from a previous 1.3% forecast, and the 2018 outlook is for 1.5% growth (1.7% before).
The economy’s sluggishness is one of the main concerns of international rating agencies, which will review their ratings of South Africa again at the end of the year.
