The South African Reserve Bank (SARB) said on Tuesday in its latest Monetary Policy Review that while there were already "clear signs" in the fourth quarter of 2007 that policy was beginning to have the expected impact on domestic demand, the economy was at the same time faced with a number of exogenous supply-side shocks.

It adds that while these shocks were initially confined to oil and food prices, more recently electricity price developments also compounded the problems.

"The higher trend of inflation outcomes has contributed to a significant increase in inflation expectations," concludes the Bank.

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