Johannesburg – A slow and gradual normalisation of U.S. monetary policy, on its own, does not need to be negative for South Africa, the Reserve Bank’s deputy governor Francois Groepe said on Friday.
In a speech posted on the central bank website, Groepe also said flows into South African securities had become increasingly sensitive to shifts in the U.S. yield curve.
The potential for sizable portfolio outflows and the ensuing depreciation of the rand currency clearly posed an upside risk to the inflation outlook, he added.
The recent depreciation of South Africa’s rand does not pose an immediate threat to financial stability in Africa’s most industrialised economy, Groepe said.
“The most pressing concern for South Africa, however, would be a sustained, currency -induced overshoot of the three to six per cent inflation target, which could in turn ‘unanchor’ broader-based inflation expectations from their current levels”. (Reuters/NAN)