The Reserve Bank left its repo rate unchanged as expected at 5%, balancing continued risks to inflation from a weaker rand with still lacklustre economic growth.
All of the 22 economists surveyed by Reuters last week expected the central bank to keep the benchmark repo rate at current four-decade lows, with the majority seeing rates unchanged for the rest of this year.
The central bank’s monetary policy committee (MPC) revised its inflation outlook for 2013 and 2014 slightly higher to 5.9% and 5.5% respectively, and said a temporary breach of the upper end of the 3-6% target band was still expected in the third quarter of this year.
The outlook for domestic economic growth had weakened further, with expansion this year now seen at 2.0% from the 2.4% projected in May, Governor Gill Marcus told a news conference.
“The MPC continues to face conflicting policy choices relating to rising inflation and slowing growth,” she said.
“The MPC is mindful of these conflicting pressures and the challenging domestic and global environment, and will continue to monitor developments closely and act appropriately to achieve its mandate.”
The central bank has not adjusted the repo rate since a 50 basis point cut a year ago, despite growth struggling below 3% from an average 5% before Africa’s biggest economy suffered a recession in 2008/2009.
Its hands have mainly been tied by a sharp fall in the rand, which has shed about 20% of its value against the dollar since the start of the year, as investors worry about the impact of labour strife, especially in the mining sector.
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