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22 May 2008 13:23
South African inflation was facing stubborn and persistent external shocks that were helping to drive prices higher, central bank Governor Tito Mboweni said on Thursday.
But it would be foolish to change the 3% to 6% inflation target range, he said in a speech at a monetary policy conference in Johannesburg.
The Reserve Bank has raised its repo rate by 450 basis points to 11,5% since June 2006 to try tame price pressures, but the targeted CPIX has surged to a five-year-high of 10,1% year-on-year, driven largely by rising food and fuel costs.
Mboweni said inflationary pressures have become more generalised, posing a severe challenge for monetary policy.
He said that it was not true that the central bank had shown a lack of concern for economic growth.
He also said a proposal from a panel of advisers that the central bank should target a level for the currency would not work.
The international panel—known as the Harvard Group—recommended in a report submitted to the government that the Reserve Bank should intervene in the market to ensure a “competitive” rand. - Reuters
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