Pretoria, South Africa — 24 May 2013 – South Africa’s central bank has kept its benchmark interest rate unchanged as the rand’s plunge adds to pressure on inflation and wage demands surge, particularly in the mining industry.
The rand has slumped 6.9% against the dollar since reaching a four-month high on May 3, the worst performer of 16 major currencies tracked by Bloomberg News, restricting governor Gill Marcus’s ability to stimulate an economy threatened by mining strikes.
The threat of mining strikes ahead of wage talks is clouding the economic outlook. Strikes last year that shut gold and platinum mines shaved about 0.5 of a percentage point off the economy’s growth rate.
The outlook for the mining industry “remains bleak with threats of shaft closures and retrenchments, falling commodity prices, high wage demands and a risk of protracted periods of industrial action and further supply disruptions,” Marcus said. The MPC is “increasingly concerned” about above-inflation wage settlements, she added.
Inflation is expected to average 5.8% this year, down from a previous estimate of 5.9%, and to exceed the bank’s target in the third quarter, when it will average 6.1%, Marcus said. The inflation rate will probably average 5.2% next year and 5% in 2015, she revealed.
Source: Bloomberg News. For more information, click here.