Marcus says no need for more slack, repo rate stays at 5%

South African Reserve Bank Governor Gill Marcus (Samantha Reinders, M&G)

South African Reserve Bank Governor Gill Marcus (Samantha Reinders, M&G)

The South African Reserve Bank has left the repo rate unchanged at 5%, saying there was no need for more monetary loosening.

The bank made a "pre-emptive" cut in July to combat challenging global and domestic growth, governor Gill Marcus said on Thursday.

But the bank cut its 2012 growth forecast to 2.6% from 2.7% predicted in July, with Marcus saying growth in Africa's biggest economy was expected to remain weak while questions remained about levels of US government debt.

Twenty-five of 28 economists polled by Reuters had forecast that the monetary policy committee (MPC) would keep the repo rate – at which it lends to commercial banks – unchanged after a surprise 50 basis point cut in July.

"At its previous meeting the MPC assessed that conditions justified a pre-emptive loosening of the monetary policy stance," Marcus said.

"Although global and domestic growth conditions remain challenging, the MPC is of the view that a further reduction in the repurchase rate is not appropriate at this stage."

Unanimous decision
The decision was unanimous although Marcus said there was some discussion about another rate during the committee's three days of deliberations.

The repo rate is at 40-year lows and only eight out of the 28 surveyed economists expect another reduction this year, at the bank's November meeting.

The bank's inflation outlook deteriorated slightly to 5.2% in 2013 from an expectation of 5.1% previously.

The bank targets a headline inflation rate of 3% to 6%. Food and petrol prices posed the main risk to its inflation forecast, Marcus said.

Inflation slowed to 5% in August, ticking up slightly from a 14-month low of 4.9% in July. – Reuters

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