Inflation should be within its three percent to six percent target by the end of 2003 and should stay there next year, South African Reserve Bank governor Tito Mboweni said on Friday.

Answering questions from Parliament's portfolio committee on finance, Mboweni said the situation looked fairly promising.

"If the Reserve Bank stays sufficiently vigilant and everybody else who is supposed to plays their part, I think we should be fairly comfortably in that inflation target by the end of the year, stay within the target next year and probably also into the first half of 2005," he said.

CPIX slowed to 6.3 percent last month from 6.6 percent in July.

Mboweni added that in the global context South Africa's economy was performing well.

"If we locate the SA economy in a global context we should not be too hard on ourselves. Growth is at 1.5 percent but we are doing better than most."

He said the bank was projecting an economic pick-up in the first quarter of 2004.

"For the whole of the year we could see the economy growing on 2.5 percent to 3 percent but a lot depends on the global economy."

Spending by the US should see global growth improving, he said.

"Three percent of course is not enough, we should be looking at something higher," he said.

He also said that the Reserve Bank was buying dollars to strengthen its reserves position, but would not attempt to influence the level of the rand.

"Whenever an opportunity arises we do purchase some dollars in the market -- its a policy that we call creaming off," he said.

He said he did not favour a fixed exchange rate system.

"We have a floating exchange rate system that is working." - Sapa