The South African Reserve Bank (SARB) is taking a cautious approach to monetary policy as risks to the inflation outlook are on the upside, deputy governor Daniel Mminele said.

South Africa’s consumer price inflation stood at 4.8 percent year-on-year in August. Statistics South Africa is due to publish the September print on Wednesday.

Mminele said several factors present upside risks to inflation, including a volatile rand exchange rate, the possibility of a larger electricity tariff increase and higher labour costs.

“Amid such elevated uncertainties, and despite the subdued nature of domestic demand, it is not clear how much space exists, if at all, for additional policy rate cuts by the (Monetary Policy Committee) in the coming quarters,” Mminele said in a speech posted on the bank’s website on Tuesday.

“If anything, domestic financial market indicators seem to broadly echo the SARB’s view that the uncertain environment is forcing a cautious approach to policy.”

The central bank surprised markets in September by leaving the benchmark lending rate unchanged at 6.75 percent following a 25 basis point cut in July, saying inflation expectations anchored towards the top end of the bank’s 3-6 percent target band.

Mminele said monetary policy decisions “now more than ever”, had to be data-dependent.

“We prefer not to surprise markets,” he said referring to the September rates decision.

“Yet in a fluid environment, where even small changes in the balance of risks can tip the policy scales one way or another, it is not possible to systematically come up with fully predictable policy decisions.”