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Aggressive policy required to lower inflation: South African cbank deputy governor
20/02/2016 00:00:00
by Reuters
 
 
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JOHANNESBURG: Aggressive monetary policy action is required in a short space of time to bring inflation back into target range, Kuben Naidoo, a South Africa Reserve Bank Deputy Governor said on Friday.

Data on Wednesday showed that inflation stood at 6.2 percent in January, breaching the upper end of the central bank's target of between 3 percent and 6 percent.

In its first meeting of 2016, the Reserve Bank hiked interest rates by 50 basis points to 6.75 percent as it sought to keep inflation below its 6 percent target despite weak economic growth.

"The cost of bringing inflation back into the target range once inflation expectations have become dislodged is high. It would require aggressive policy action in a short space of time," Naidoo said in a speech posted on the Bank's website.

Naidoo said that it would be short-sighted of the Reserve Bank to overlook inflation and consider only short-term economic growth in its decision making.

"Our monetary policy response going forward will depend largely on how surveyed and implied inflation expectations play out over the course of this year," he added.

The deputy governor also said above-inflation wage deals posed significant upside risk to the inflation outlook and may force the bank to adopt a tighter monetary policy stance.

South Africa's economic growth is expected to be weak this year, and the bank has forecast growth at 0.9 percent from a previous estimate of 1.5 percent, hurt by power shortages, rising labour costs, diving commodities prices and the worst drought in a century.

 



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