South Africa has held its key interest rate at a four-decade low of 5 percent since July and despite threats to growth and inflation, South Africa’s Reserve Bank governor said it’s unlikely the bank will change interest rates anytime soon.
The rand’s swings over more than 20 cents a day this week and its drop of 15 percent against the U.S. dollar since early May are a “major cause for concern,” Gill Marcus said Thursday at an economic conference, according to a report.
Marcus highlighted the pressure on South Africa’s 5.9 percent annual inflation rate, which is already near the bank’s target ceiling of 6 percent.
Marcus sounded a note of caution on investment flows into South Africa and other emerging economies. When developed-world banks begin to step back from the massive quantitative easing programs they have undertaken for the past few years, emerging-market economies like South Africa, where 40 percent of bonds are held by foreigners, must ensure that they can handle the potential capital outflows, she said.
Read more at Nasdaq.com.