Friday, September 23, 2011

South African Reserve Bank Keeps Repo Rate at 5.50%

The South African Reserve Bank [SARB] kept its monetary policy interest rate, the repo rate, on hold at 5.50%.  The Bank said: "Recent data have confirmed the fragile and uneven nature of the domestic economic recovery, and unfavourable forward-looking indicators are consistent with a downward revision of the Bank's economic growth forecast. At the same time a number of exogenous factors have continued to put upward pressure on domestic inflation. This combination of declining growth and rising inflation poses a challenge to monetary policy going forward, and is a feature being experienced in a number of emerging markets."

Previously the SARB also held the repo rate unchanged at its July meeting this year, the Bank last cut the repo rate by 50bps to 5.50% in November 2010.  South Africa reported annual inflation of 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, while the SARB is forecasting 2011 growth of 3.2%.  The South African Rand (ZAR) has weakened by about 25% against the US dollar so far this year, with the USDZAR exchange rate trading around 8.31


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