Inflation a concern but Sarb also needs to keep an eye on rand, warns economist

JOHANNESBURG – Citibank economist Gina Schoeman said that it was no surprise that the South African Reserve Bank opted to increase the repo rate by 75 basis points to 6.25%.

The central bank’s decision comes in a bid to curb runaway inflation.

Higher food and fuel prices are among some of the drivers of high inflation.

Despite a slight decrease to 7.6% in August, the reserve bank remains concerned that inflation is not yet under control.

Economist Gina Schoeman said that while inflation remained a major concern, the reserve bank would also need to keep a close watch on the currency.

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Schoeman believes a weaker rand will place a bigger demand on the central bank to tighten its controls.

Domestic factors that are likely to impact the currency include the dreaded power cuts.

The country is currently between stage 5 and 6 load shedding, denting investor confidence substantially.

Schoeman said that the upcoming African National Congress (ANC) elective conference in December was also likely to influence the currency.

“The reason I bring in the currency is that this is where it all lands,” Schoeman said.

Schoeman added that interest rates were unlikely to fall anytime soon.

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