South Africa’s Reserve Bank left its benchmark interest rate unchanged at 5,0% on Thursday, citing concerns about rising food prices and a depreciating rand exchange rate in a period of slowing growth.

Here are highlighted comments from Sarb Governor Gill Marcus on the Monetary Policy Committee’s interest rate decision:

INFLATION

  “The risk to the inflation outlook remains on the upside due in large part to continued exchange rate and wage cost pressures.

  “The inflation forecast of the bank reflects a further deterioration in the inflation outlook for 2013 compared with the previous forecast.

  “Having averaged 5,6% in 2012, inflation is now expected to average 5,8% in 2013, and 5,2% in 2014 compared with previous forecasts of 5,5% and 5,0% for the respective years.

  “Inflation is expected to peak at 6,1% in the third quarter of 2013 and then to moderate gradually to 5,1% in the final two quarters of 2014. This deterioration is largely due to higher expected food price inflation, the lagged effects of the depreciation of the rand and higher expected unit labour costs.”

DOMESTIC GROWTH

  “Domestic economic growth remains fragile and below potential following an annualised growth rate of 1,2% in the third quarter of 2012 and an estimated growth rate of around 2,5% for the year.

  “A similar outcome is expected in 2013 with growth of 2,6% forecast, revised down from 2,9% in the previous forecast.

  “A more favourable outcome of 3,8% is forecast for 2014, compared with 3,6% previously, driven in part by a more favourable global outlook.

  “However, the risks to these forecasts are assessed to be on the downside, given uncertainties and instability in parts of the mining and agricultural sectors in particular.”

RAND

  “The rand exchange rate continues to pose an upside risk to the inflation outlook.

  “The exchange rate has been impacted by the widening deficit on the current account on the balance of payments in 2012 and changing global and domestic risk perceptions particularly relating to the adverse developments in the South African labour market and the downgrades by the various ratings agencies.

  “While the rand is expected to remain sensitive to domestic and global developments and continued volatility can be expected, most analysts do not expect significant further sustained depreciation in the coming months.

  “The depreciation of the rand is expected to help moderate the current account imbalance, although platinum export growth may be undermined to some extent by possible shaft closures.”

WAGE SETTLEMENTS

  “The MPC remains concerned about the potential impact of the higher level of wage settlements on employment and inflation.

There are indications that wage increases are trending higher, with growth in nominal remuneration per worker increasing from 7,2% in the second quarter of 2012 to 8,1% in the third quarter.

  “The MPC is mindful of the dangers of a possible wage-price spiral and further employment losses should unaffordable real wage demands be granted while economic growth remains constrained.

  “The risk to inflation should this scenario play itself out are significant in the absence of productivity gains.”

DECISION

  “The monetary policy stance remains accommodative and appropriate, with the real policy rate remaining slightly negative, notwithstanding the expected temporary breach of the inflation target. However, further accommodation at this stage is constrained by the upside risks to the inflation outlook.

  “The MPC has therefore decided to keep the repurchase rate unchanged at 5,0% per annum. As always, the MPC will monitor developments closely and will not hesitate to act in a manner consistent with its mandate.”