July 19, 2018 / 1:05 PM / 3 months ago

South African central bank comments on rate decision

PRETORIA, July 19 (Reuters) - Below are comments from South African Reserve Bank (SARB) Governor Lesetja Kganyago on Thursday as he announced the central bank’s latest decision on its benchmark repo rate.

INFLATION

“While headline inflation is comfortably within the inflation target band, indications are that we have passed the low point of the current cycle.

Developments in the international environment have placed upward pressure on the inflation trajectory, while domestic growth outlook remains challenging.

“Despite remaining within the target band throughout the forecast period, the SARB’s model projects an increase in headline inflation, peaking at levels closer to the upper end of the target range.

“The global inflation outlook remains benign, but is on a moderate upward path, largely due to rising oil prices.

“A key external risk to the rand remains the possibility of tighter global financial conditions.”

GROWTH

“The domestic economic growth outlook for this year is weaker than we expected in May.

“Key uncertainties in the global environment remain. The continued strength of the US dollar, which has appreciated against most currencies, any sustained elevation of oil prices, escalating trade tensions, and geopolitical developments continue to pose risks to the inflation outlook.

“The rand will remain sensitive to changes in global monetary policy settings and investor sentiment toward emerging markets.

“The committee assesses the risks to the inflation forecast to be on the upside. A number of key risks and uncertainties highlighted in recent meetings persist.”

“Since the previous meeting of the Monetary Policy Committee (MPC), several risks to inflation outlook have begun to materialise. While headline inflation is comfortably within the inflation target band, indications are that we have passed the low point of the current cycle.”

RAND

“Since the previous meeting of the MPC, the rand has depreciated by 7.2 percent against the U.S. dollar, by 6.2 percent against the euro, and by 4.9 percent on a trade-weighted basis.”

Reporting by Olivia Kumwenda-Mtambo, Nqobile Dludla and Patricia Aruo Compiled by James Macharia

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