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The Democratic Alliance (DA) welcomes the decision of the Reserve Bank to keep interest rates unchanged. This decision is informed by long term considerations that have to balance the stability of the rand against the need to address economic growth considerations. Most importantly, the Bank has remained independent in its decision and this will ensure that no special interest group is favoured to the detriment of the rest of the country. The recent double digit wage increases across different sectors and the expected electricity tariff hike will both contribute to inflationary pressure in the next few months, despite the general downward trend in CPI. Base effects on oil prices in the fourth quarter of the year are also set to dampen any quick slowdown in fuel inflation and might also post figures above 10 per cent towards the end of the year.

The Reserve Bank needs to take its mandate of inflation targeting seriously - and the relatively hawkish stance is necessary in the current environment.