South Africa’s central bank will not be soft on inflation, Reserve Bank Governor Gill Marcus said on Tuesday, reiterating the bank was concerned about the impact on inflation from food and oil prices.
The Reserve Bank kept its benchmark repo rate on hold on last week as expected but raised its inflation and growth forecasts, reinforcing expectations interest rates will start to rise later this year.
On Tuesday, Marcus said she expected inflation to pick up somewhat.
“We will not be soft on inflation, whatever measures we have to take we will take, but in a measured manner,” Marcus told a group of small businesses in Johannesburg’s Soweto township.
Marcus said it was a challenge identifying what measures to take to tackle gains in the rand currency which she said were not solely driven by capital inflows.
The rand gained about 12% against the dollar last year despite the central bank spending just under R55-billion accumulating reserves.
The currency fell about 10% against the greenback in the first two months of this year, but has since reversed most of those losses. It last traded at 6.8675 on Tuesday, from about 6.87 just before Marcus’s speech.
“There’s something else working here. We’ve seen outflows this year but the rand is where it was before. Part of the rand story is what is happening between the dollar and the euro, it’s not so simple,” Marcus said. — Reuters