South Africa's targeted inflation is not expected back in the 3% to 6% band before the end of 2009, and there are significant upside risks to this forecast, South African Reserve Bank Governor Tito Mboweni said on Tuesday. The Reserve Bank has raised its repo rate by 450 basis points to 11,5% since June 2006 to try to tame inflation.
South Africa should be prepared to intervene in the foreign exchange market to keep its currency stable and ''competitive'', and should maintain its inflation targets, a group advising the government said. In its report released on Thursday, an international panel -- known as the Harvard Group -- also suggested a budget surplus of between 1% and 2% to help ease inflation.
High food and fuel costs in South Africa have spilled over into second-round inflationary effects that have to be tackled, Reserve Bank Governor Tito Mboweni said on Tuesday. He also, again, warned in an interview with CNBC Africa that an excessive increase in electricity prices will have serious consequences for inflation.
The South African Reserve Bank warned on Thursday that high household debt was a potential source of vulnerability and the growth in non-performing loans must be closely monitored. Elevated and volatile oil prices could also impact on economic and financial stability through higher inflation, interest rates and on an already large current-account deficit, it said.
South African economic confidence recovered from a near four-year-low in March, pointing to signs conditions may improve in the medium term, although the growth and inflation outlook remained bleak. A survey of 22 economists released on Thursday showed the Reuters Econometer ticked up to 231,39 from 227,02 in February.