PRETORIA, May 24 (Reuters) - Below are comments from South African Reserve Bank (SARB) Governor Lesetja Kganyago on Thursday as he announced the central bank’s latest decision on its benchmark repo rate.
“The headline inflation forecast is more or less unchanged since the previous meeting of the MPC, despite the upward adjustments to the international oil price and the weaker starting point for the trade weighted exchange rate.
“There is a degree of uncertainty regarding the likely impact of the VAT increase and sugar tax.
“Nominal wage growth trends remain more or less unchanged, and upward pressure on inflation from this source is therefore expected to persist.
“The MPC noted the relative stability of the inflation forecast.
“The MPC assesses the risks to the inflation forecast to have moved to the upside. This change is mainly due to global developments.”
“The domestic growth outlook remains challenging, although growth is still expected to outperform recent year outcome. Consumption expenditure by households is expected to be the main driver of growth going forward.
“The growth forecast has improved moderately, mainly for 2019, but remains too low to make serious inroads into the unemployment rate.
“The domestic economic growth outlook has improved moderately amid rising business and consumer confidence, despite a disappointing first-quarter performance in a number of key sectors.”
“In the near term the rand is expected to remain volatile. The resurgent U.S. dollar and higher U.S. long-bond yields have led to sharper lower capital flows to emerging markets ... coupled with persistently rising international oil prices, have contributed to the reversal of some of the recent rand strength, titling the balance of risks to the domestic inflation outlook to the upside.”
“In light of the change in the balance of risks to the inflation outlook, the MPC unanimously decided to keep the repurchase rate unchanged at 6.5 percent per annum.”
Reporting by Mfuneko Toyana and Alexander Winning Editing by James Macharia