For the quarter under review, the Reserve Bank kept the benchmark interest rate at 5%. Weak domestic growth, together with higher inflation has prevented the Reserve Bank from initiating an alternative monetary policy response. The Rand fell to the lowest level in four years during March and continues to remain a major risk factor to higher inflation. Elevated fuel prices, combined with wage and electricity price increases will maintain the upward pressure on inflation. CPI accelerated to 5.9% in February approaching the Central banks upper target limit of 6%. Governor Gill Markus raised the inflation forecast for this year from 5.8% to 5.9%. Inflation expectations have increased this year due to the Rand's weakness.

Minister of Finance, Pravin Ghordan mentioned that the economic slowdown in Europe coupled with mining strikes has reduced exports, which has caused a decline in the domestic economy. Growth in the domestic economy has been forecast to expand 2.7% this year. The combination of slowing growth and rising inflation could present a stale mate scenario for the Monetary Policy decision makers. Benign growth could thwart an increase in interest rates even if inflation quickens. Given this backdrop, STANLIB maintains the view that interest rates will remain unchanged for a prolonged period of time. The Money Market portfolios are positioned to take advantage of potential market mispricing. Floating rate instruments still provide a prospective investment opportunity, given a flat Money Market yield curve