Policy makers will continue to face the twin challenges of rising inflation and slowing output this year, while the direction of global commodity prices in coming months remains the wild card, clouding the inflation outlook.

Policy makers will continue to face the twin challenges of rising inflation and slowing output this year, while the direction of global commodity prices in coming months remains the wild card, clouding the inflation outlook.

This is the view of global analysts Moody's Economy.com, who say that the tug-of-war between rising inflation and decelerating growth continues to dominate South Africa's economic landscape.

The Reserve Bank's increasing concern about rising inflationary pressures led to a decision to raise interest rates half a percentage point to 12percent last week, with borrowing costs now at a five-year high.

The analysts say there are increasing signs that the central bank's aggressive tightening over the last year or so is starting to bite, with retail sales, credit expansion, and the country's resilient housing market all showing signs of slowing in recent months. - I-Net Bridge