The Monetary Policy Committee (MPC) decided to keep the policy rate unchanged, at 6.75%.
Lesetja Kganyago, Governor of the South African Reserve Bank (SARB), attributed the decision to “a rapture of new threats.”
Services inflation is still at 4%, above the SARB’s target of 3%.
In addition, heightened geopolitical tensions, trade policy and economic policy uncertainty are on the rise.
Kganyago said it is important to understand how these risks affect South Africa.
For example there was a 30% slap of tariffs on exports by the United States, which negatively affected the agricultural and transport sectors.
The challenge of Eskom and the energy regulator (NERSA) settlement out of court, could also add to risks.
Despite the projected 3,3 growth of the economy this year, and a strong currency driven by solid gold and other metals such as platinum, Kganyago said the SARB is concerned about food inflation, especially meat prices, which are affected by the foot and mouth outbreak.
“We are also concerned about electricity prices, given that NERSA’s price correction may rise from R54 billion to R76 billion.”
Factors that have pushed inflation higher are oil price deflation and high food prices.
The next decision of the MPC will be communicated in March.
Picture: Supplied