In line with expectations, the Reserve Bank this week opted to maintain the repo rate at 7%. The decision came despite an upward revision to its inflation forecast. The bank now expects the inflation rate to average 6.2% relative to the 5.8% pencilled in at the end of last year. Furthermore, inflation is expected to remain above the target band for most of this year, only returning within the bank's target in the fourth quarter.Granted, the factors driving inflation are transient, and the downward adjustments in average inflation expectations for the second consecutive quarter underlined this. However, the bank's willingness to tolerate an extended breach of the target band suggests it is concerned about weak economic growth. Elevated food prices seemed to have been the main instigator behind the Reserve Bank's inflation revision. The bank is now more bearish on food prices (particularly meat) than it was in its November sitting. Developments in the food market suggest this cautious...
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