Marcus, who also announced at the Monetary Policy Committee (MPC) meeting that she would not be renewing her contract at the end of her tenure on 8 November, stated that the view of the MPC is that interest rates will normalise over time.
“Given the slightly improved inflation outlook notwithstanding the upside risks, the stable inflation expectations and the downside risks to the weak growth outlook, the MPC has decided that the repurchase rate will remain unchanged,” Marcus said.
“Despite the 75 basis point increase so far this year, monetary policy remains accommodative, and will continue to be supportive of the domestic economy subject to achieving its primary inflation targeting objective.”
Marcus however alluded to the fact that the current account deficit in the second quarter of 2014 was wider than generally expected by the markets.
“This widening was a result of increased dividend outflows, lower dividend inflows following a large once-off inflow during the first quarter, and weak export growth, impacted to some extent by the platinum strike,” she said.
“Export growth in the third quarter is expected to remain constrained by the slow return to full capacity production by the platinum mines and the strike in the steel and engineering sector in July. The current account is anticipated to narrow gradually over time.”
The South African Reserve Bank’s (SARBs) forecast for GDP growth for 2014 was revised down further as well to 1.5 per cent, from 1.7 per cent previously.
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“The domestic economic growth outlook remains weak following growth rates of -0.6 per cent and 0.6 per cent in the first and second quarters of the year respectively. These growth rates are well below potential output growth and indicative of a widening output gap,” said Marcus.
“The forecasts for both 2015 and 2016 have been revised down by 0.1 percentage points, to 2.8 per cent and 3.1 per cent respectively. The bank’s leading indicator of economic activity continues to trend sideways, consistent with a subdued growth outlook.”