The governor of the Reserve Bank’s decision to leave interest rates unchanged appeared the best option in the current circumstances, Nedbank said on Thursday.
Reacting to Tito Mboweni’s announcement, the bank said in a media statement: ”The decision to leave rates unchanged appears the best option under the current circumstances, where historical inflation has surprised on the downside and the two-year inflation outlook still remains favourable, but the risks to the outlook have increased significantly.”
The bank said the main worries were persistently high global oil prices, continued robust growth in domestic spending, surging credit demand and the alarming rise in household debt.
Mboweni has also expressed concern over the risk posed by the widening current account deficit to the rand’s future stability.
”This is significant as the strong rand has been a key factor in bringing inflation into the target range and keeping price increases in check despite mounting cyclical pressures and high global fuel prices.”
The expectations of continued rand strength was probably also the key ingredient behind the moderate inflation forecasts of the Reserve Bank and other analysts.
Mboweni was expected to keep rates steady for the rest of the year, but the undertone of his statement suggested that the risks to the inflation outlook have moved to the upside, Nedbank said. – Sapa