PRETORIA: South Africa's Reserve Bank kept interest rates at 5.0 percent as expected Thursday, as it wrestles with a sluggish economy and dysfunctional manufacturing sector.
"There was no ambiguity about the question of holding," said the governor of the South African Reserve Bank Gill Marcus at a press briefing in the nation's capital, Pretoria.
"We did not think it was appropriate to raise rates at this meeting," she said, adding that the Monetary Policy Committee were considering raising rates in the future.
"Certainly raising rates was a discussion," said Marcus. The Reserve Bank has held its benchmark interest rate since July 2012.
But it is facing a policy dilemma, as it struggles to balance high inflation against a volatile rand, which has depreciated by 17 percent against the US dollar since the beginning of the year.
Marcus called upon all players in the country's economy to work toward stimulating growth.
"We need to take advantage of the depreciated exchange rate and not allow the benefits to be eroded through higher wage and other input prices," said Marcus.
"Action will be required should the adjustment mechanism not operate effectively."
"Quite a number of these issues are structural and they need to be addressed," she said, "the climate is extremely difficult and we need to work together."
Speculation regarding the tapering of US Federal Reserve stimulus, and suggestions that the trade account will deteriorate - a result of protracted strikes that resulted in the decreased production of motor vehicles - will stoke rand volatility, said the bank.
"Tapering by the Fed is inevitable, but until a decision is taken financial markets globally are likely to experience heightened volatility," said Marcus. "Compounding the risks to the exchange rate is the stubbornly wide current account deficit."
The domestic growth outlook remains fragile. The bank has revised its forecast for growth in 2013 down to 1.9 percent, while the forecast for 2014 has been revised down to 3.0 percent.
In October, inflation slowed to 5.5 percent, in the upper range of the bank's three to six percent target.
"Despite this favourable development, inflation is expected to remain uncomfortably close to the upper end of the target band," said Marcus. Business and consumer confidence levels are poor in the country.
Consumer confidence is near a decade low, said First National Bank on November 18. "Many households appear to be postponing their purchases of durable goods such as furniture and household appliances in the face of a slowdown in credit extension and the deterioration in the domestic economic climate," said Sizwe Nxedlana, chief economist at First National Bank, in the report.
On November 26, statistics South Africa will publish third-quarter gross domestic product data.
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