PRETORIA – The risks to South Africa’s moderate inflation outlook are external and further interest rate easing will not be automatic, Reserve Bank Governor Gill Marcus said on Friday.
“Given the subdued domestic economy, the risks to the inflation outlook are mainly of a cost-push nature,” Marcus told reporters at the Reserve Bank’s annual general meeting, referring to higher input costs.
The bank has said upside risks to the inflation outlook emanate from the oil price and the rand exchange rate.
The bank surprisingly cut interest rates to 5 percent last week, after keeping rates steady for 19 months, citing concern about the effect of the global economic downturn on Africa’s largest economy.
It cut its inflation forecast to 5.6 percent for 2012, from 6 percent as recent prices came in below market expectations.
“There has been much speculation as to whether this was a beginning of a renewed interest rate easing cycle. Further monetary easing is not automatic and will be highly dependent on global and domestic developments,” Marcus said.
Marcus also said there was no evidence of interest-rate rigging in South Africa, suggesting local banks would avoid the scandal currently plaguing British rivals.
“Domestically there has been no evidence to suggest that there could have been manipulative practices in the determination of the local equivalent of LIBOR, the JIBAR rate, over the past decade.”
Separately, British bank Barclays on Friday pledged to repair the damage to its reputation caused by its role in the interest rate rigging scandal that has rocked the banking industry.
Barclays is the majority shareholder in Absa Group, South Africa’s third-largest bank.