HIGHLIGHTS-South African central bank comments on rate decision | Reuters

PRETORIA May 25 Below are comments from South
African Reserve Bank Governor Lesetja Kganyago on Thursday as he
announced the central bank’s latest decision on its benchmark
repo rate.
GROWTH
“The Bank’s forecast for GDP growth has been revised down for
the entire forecast period, by 0.2 percentage points for 2017
and 2018, and by 0.3 percentage points in 2019.
“Domestic economic growth prospects have deteriorated, as the
impact of the ratings downgrades is expected to weigh on
domestic investment and consumer sentiment … However the
trajectory of the growth forecast is still positive.”
INFLATION
“While the inflation outlook has improved over the near term,
the longer term trajectory is unchanged and uncomfortably close
to the upper end of the target range.”

RAND
“The rand exchange rate and domestic bond yields benefited
from increased global capital flows to emerging markets which
largely offset the impact of the sovereign credit ratings
downgrade.
“With further ratings decisions imminent, risks remain for a
further depreciation against the backdrop of continued global
and domestic political uncertainty.”

FOOD PRICES

“A continued moderation of food prices is expected over the
medium term given the favourable agricultural outlook and the
significant upward revisions to the maize crop estimates.”

WAGE INCREASES

“Nominal salary and wage increases have continued to show
signs of significant moderation, but are still at levels that
contribute to the persistence of inflation at higher levels.”

CURRENT ACCOUNT

“A moderately wider current account deficit is expected over
the forecast period, due in part to a recent deterioration in
the terms of trade.”

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DECISION

“The MPC assesses the risks to the inflation outlook to be
more or less balanced… The MPC has decided to keep the
repurchase rate unchanged at 7.0 percent per annum.

“The MPC remains of the view that the current level of the
repo rate is appropriate for now and that we are likely at the
end of the tightening cycle.

“Five members preferred an unchanged stance while one member
preferred a 25 basis point reduction.”
(Reporting by Mfuneko Toyana and TJ Strydom; Editing by Ed
Cropley)

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