On the one hand, underlying inflation trends and inflation expectations are already relatively high, and the potential for sizable portfolio outflows and ensuing currency depreciation clearly poses an upside risk to the inflation outlook. On the other hand, the domestic economy is weak, and policy tightening could aggravate such weakness.
There is indeed no denying that the South African economic growth outlook is more challenging than a year ago. At present, the SARB is projecting real economic growth of 1,4 per cent in 2015 and 1,5 per cent in 2016. At the time of the November 2014 MPC meeting, these forecasts stood at 2,5 per cent and 2,9 per cent respectively.