South African Reserve Bank Holds Repo Rate at 5.50%

The South African Reserve Bank [SARB] held its monetary policy interest rate, the repo rate, unchanged at 5.50%.  The Bank said: "The MPC remains of the view that inflation pressures are primarily of a cost-push nature, but is concerned that a persistent upward trend in inflation and prolonged breach of the inflation target could have an adverse effect on inflation expectations which could reinforce the upward inflation dynamics. However, the MPC is also cognisant of the slowing domestic economy and feels that given the lack of demand pressures, monetary tightening at this stage would not be appropriate. At the same time, the nominal policy rate is at a long term low and the real policy rate is slightly negative, indicating a monetary policy stance that is accommodative and supportive of the real economy."

Previously the SARB also held the repo rate unchanged at its November meeting last year, the Bank last cut the repo rate by 50bps to 5.50% in November 2010.  South Africa reported annual inflation of 6.1% in December, compared to 5.7% in September, 5.3% in August and July, 5% in June, 4.6% in May, and 4.2% in April this year, compared to its official inflation target range of 3-6%. 

South Africa's economy grew 1.3% in the June quarter, and 1.4% in the September quarter of 2011.  Meanwhile the South African Rand (ZAR) has weakened by about 12% against the US dollar over the past year, with the USDZAR exchange rate last trading around 7.93

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