Reserve Bank worried about oil, food prices

The South African Reserve Bank remains concerned about the effects of rising oil and food prices on the outlook for inflation, Governor Gill Marcus said on Tuesday.

The bank’s monetary policy committee (MPC) will meet on March 22 to March 24 to deliberate on interest rates. It left its repo rate unchanged at 5,5% in January, after reducing it by 650 basis points since December 2008 to help boost growth, in particular after a recession in 2009.

“We remain concerned about the impact of rising international food prices … oil prices, as well as administered prices on the inflation outlook,” Marcus said, noting also that economic growth is still far below the 7% needed to create jobs.

“Our MPC meeting next week will consider all these,” she told a women’s economic workshop.

International oil prices have climbed above $100 a barrel and food prices have also risen, stoking inflation around the world.

‘Strongish rand’
So far, South African inflation has largely been contained thanks to a strong rand. The currency has gained about 28% against the dollar since the beginning of 2009.

Last week, Finance Minister Pravin Gordhan said the “strongish rand” was helping on the inflation front but the government wants a competitive exchange rate.

Inflation averaged 4,3% last year, and has been within the central bank’s 3% to 6% target since February 2010.

In January, the bank revised its inflation outlook upwards but said it still expected it to remain within the target range until the end of 2012, averaging 4,6% this year and 5,3% in 2012.

It said at its previous meeting that oil and food prices were the main risks to the inflation outlook. South Africa’s annual inflation quickened to 3,7% in January. — Reuters

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