JOHANNESBURG: The South African Reserve Bank held interest rates unchanged Thursday in the face of high inflation, while warning of major risks to already mediocre growth.
Reserve Bank governor Gill Marcus said the main interest rate would stay at five percent, despite the bank cutting its growth forecasts for the year.
"There are a number of critical domestic issues that are contributing the vulnerability of the economy that need to be urgently addressed," Marcus said.
Africa's largest economy is struggling under high inflation and slow growth which is likely to come in at a lower than expected 2.4 percent this year.
In April inflation remained unchanged at 5.9 percent for the third month in a row, according to figures released this week.
Any move to cut rates would stimulate growth, but would also risk stoking inflation.
Marcus said inflation was likely to breech the bank's six percent-threshold in the third quarter of this year.
The weakness of the rand -- which is at its lowest level in four years -- is also putting pressure in prices, making imports more expensive.
"The current level of exchange rate, if sustained, poses a significant upside risk to the inflation outlook," Marcus said.
Prices are being further fuelled by elevated wage demands -- with the powerful National Union of Mineworkers (NUM) seeking up to 60-percent pay rise for coal and gold miners.
Amid tensions between rival unions in the north of the country, President Jacob Zuma warned Thursday against illegal stoppages that regularly halt production.
"Wildcat strikes of the type happening in the mining industry and other sectors are hardly the way to advance the interests of marginalised sections of our people," he said.
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