Bloomberg News

Marcus Says South African Monetary Policy Faces ‘Challenge’

June 14, 2011

(Updates with governor’s comments in fifth paragraph and pay increases in last.)

June 14 (Bloomberg) -- South Africa’s economic recovery is becoming more “self-sustained,” while rising fuel and food costs are pushing up inflation and creating a challenge for monetary policy, Reserve Bank Governor Gill Marcus said.

Risks to the inflation outlook are on the “upside,” Marcus said in the bank’s annual report, released in the capital, Pretoria, today.

The Reserve Bank has kept its benchmark interest rate unchanged at 5.5 percent this year, forecasting that inflation, which reached 4.2 percent in April, will breach the bank’s 3 percent to 6 percent target range in the first quarter of 2012. Moody’s Investors Service said last week the bank may raise rates later this year.

“Global commodity price increases have begun to pose risks to the domestic inflation outlook,” Marcus said. “This is expected to create a challenge for monetary policy going forward.”

Marcus told reporters in Pretoria today that her assessment hasn’t changed since last month’s Monetary Policy Committee meeting, when the bank left interest rates unchanged.

“This is very much in keeping with what we have said,” Marcus said. “There are signs of a recovery, it is fragile, and we’re concerned about the globe.”

Inflation Focus

The bank will continue to focus on its goal of price stability, which will provide the proper environment for faster economic growth and job creation, Marcus said.

Africa’s biggest economy is forecast by the bank to expand 3.6 percent this year. The government has pledged to create 5 million new jobs by 2020, which requires economic growth of 7 percent a year, according to government estimates.

“We will continue to give primacy to our objective of price stability, and implement monetary policy within a flexible inflation-targeting framework,” Marcus said.

The Reserve Bank boosted employee salaries by 7 percent last year, which included a 4.3 percent average settlement and 2.7 percent performance increase, Marcus said. Directors of the board were awarded a 5.5 percent average increase, while the bank raised Marcus’s pay by 4.5 percent, Thandeka Mgoduso, head of the remuneration committee, told reporters today.

--Editors: Gordon Bell, Ben Holland, Philip Sanders

To contact the reporter on this story: Nasreen Seria in Johannesburg at

To contact the editor responsible for this story: Andrew J. Barden at

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