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17 Nov 2009 15:04
The South African Reserve Bank left interest rates unchanged on Tuesday.
Newly appointed governor Gill Marcus said the Monetary Policy Committee (MPC) had decided to keep the key repo rate at 7%.
This means that the prime rate stays at 10,5%.
This had been expected by economists.
Twenty-four of the 28 economists polled by Reuters saw the central bank leaving the repo rate unchanged, while four forecast a 50 basis point cut for the repo rate to 6,5%.
The Reserve Bank has cut its repo rate by 500 basis points since December 2008 to support the economy, which has been hit by its first recession in 17 years.
But manufacturing output figures and new car sales numbers have indicated the worst of the recession may be over and a recovery is under way, although it is expected to be slow.
Marcus assumed the position of governor at the bank on November 9, taking over from Tito Mboweni.
The rates meeting took place after the African National Congress and its allies agreed over the weekend to look into broadening the mandate of the Reserve Bank and set up a task team to study the impact of the strong rand currency, which has gained more than 20% against the dollar so far this year.
Communist and labour allies of the ruling party want the central bank’s mandate of targeting inflation between 3%and 6% abandoned.
They say strict adherence to it has hurt the poor through high interest rates.
Marcus on Tuesday said the monetary policy committee would revert to its previous pattern of meeting every alternate month.
“During 2009, against the background of heightened volatility and uncertainty in international financial markets and the severe downturn in the global economy, the MPC decided that it would be appropriate to meet more frequently for the rest of the year in order to assess the changing circumstances in a timeous manner and to be able to act appropriately when necessary,” she said.
Although risks still remained, the global environment appeared to have stabilised somewhat.
“The MPC has therefore decided to revert to the previous pattern of meeting every alternate month.
“Should the need arise, this frequency will be reconsidered.
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