Reserve bank to remain ‘vigilant’ on inflation target range

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The Reserve Bank has cited the recent VAT increase and electricity tariff hikes as the biggest risks to the inflation outlook in the coming months.

The bank left interest rates unchanged on Thursday, but it’s warned that external factors such as higher oil prices could also help push up inflation in the coming months.

Reserve Bank Governor Lesetja Kganyago says the MPC will maintain its vigilance to ensure inflation remains within its target range of between 3% and 6%.

He says, “Greater clarity in regards to electricity tariffs is expected in June when NERSA is scheduled to respond to Eskom for an increase in the order of 30%. Our current assumption is for an 8% increase from mid-2019 and these pose an upside risk to our inflation forecast. The MPC attempts to look through the effects of such shocks and to react to second round effects.”