(MENAFN- AFP) South Africa's Reserve Bank raised its key interest rate on Thursday and slashed its 2014 growth forecast further owing to industrial strikes and high inflation.
The central bank raised its repo rate by 25 basis points to 5.75 percent, and said economic growth was now expected to slow to 1.7 percent.
It "remains concerned about weak growth, widening output gap and the negative employment outlook," said Bank chief Gill Marcus amid a 25.2-percent unemployment rate.
The bank "faces an increasingly difficult dilemma of rising inflation and slowing growth," she added.
A weak currency and rising food prices further complicated the rate change decision.
The inflation outlook worsened since the bank's last meeting in May. Measured at 6.6 percent two months ago, the rate is expected to stay above the 6.0-percent target until next year.
Meanwhile a series of wage strikes have severely affected economic growth.
Key car manufacturers have shut down their South African plants amid a third week of strikes by around 200,000 workers of the country's largest labour group, the National Union of Metalworkers of South Africa (NUMSA).
The stoppages came after a five-month-long platinum mining strike ended last month, after dragging the economy into recession in the first quarter of this year.
Marcus warned the strikes could spread like a virus in South Africa, leading to a wage-price spiral.
The bank governor said it was "imperative" that some the focus on mining wages should be shifted to "excessive salaries and bonuses" of mine management and executives.
"In the short term, an improvement in the interaction and relationships between management and labour is essential to foster a climate of trust and confidence, and get South Africa back to work," she said.
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