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HIGHLIGHTS-South African central bank comments on rate decision

JOHANNESBURG, Sept 17 (Reuters) - Below are comments from South African Reserve Bank Governor Lesetja Kganyago on Thursday as he announced the central bank's latest decision on its benchmark repo rate, leaving it at 3.5%.


INFLATION

"The Bank's headline consumer price inflation forecast averages 3.3% in 2020 and is lower than previously forecast at 4.0% in 2021 and at 4.4% in 2022. The forecast for core inflation is lower at 3.4% in 2020, and remains broadly stable at 3.7% in 2021, and 4.0% in 2022."

"The overall risks to the inflation outlook at this time appear to be balanced. Global producer price and food inflation have bottomed out. Oil prices remain low. Local food price inflation is expected to remain contained."

"Risks to inflation from currency depreciation are expected to stay muted while pass-through remains low. While there are no demand side pressures evident, electricity and other administered prices remain a concern. Additional exchange rate pressures could result from heightened fiscal risks."


GROWTH

"The Covid-19 outbreak has had major health, social and economic impacts, presenting difficulties in forecasting domestic and global economic activity. The compilation of accurate economic statistics has and will remain severely challenged."

"The Bank now forecasts a GDP contraction of 8.2% in 2020, compared to the 7.3% contraction forecast in July. The lower second quarter is followed by revised projections of a stronger expansion in the third and fourth quarters of 2020."


DECISION

"Against this backdrop, the MPC decided to keep rates unchanged at 3.5% per annum. Two members of the committee preferred a 25 basis point cut and three preferred to hold rates at the current level."

"The implied policy rate path of the Quarterly Projection Model indicates no further repo rate cuts in the near term, and two rate increases in the third and fourth quarters of 2021."

(Reporting by Olivia Kumwenda-Mtambo, Mfuneko Toyana and Alexander Winning)