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No change in rates - Sarb

Jul 18 2013 15:33 Fin24
Reserve Bank governor Gill Marcus. (AFP, Lionel Bo

Reserve Bank governor Gill Marcus. (AFP, Lionel Bonaventure)

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Cape Town - The South African Reserve Bank (Sarb) is keeping the repo rate at 40-year lows of 5%, said governor Gill Marcus on Thursday.

The repo rate is the interest rate at which the Sarb lends money to commercial banks.

The Monetary Policy Committee (MPC) continues to face conflicting policy choices relating to rising inflation and slowing growth.

Despite the upward trend in core inflation, there are no strong signs of excess demand pressures and the forecast for headline inflation suggests that the breach of the target may be short-lived.

Inflation is now expected to average 0.1% and 0.3 percentage points higher in 2013 and 2014, at 5.9% and 5.5% respectively, while the forecast for 2015 has been raised from 5.0% to 5.2%.
   
The Bank's growth forecast for 2013 has again been revised down from 2.4% to 2.0% and from 3.5% and 3.3% for 2014.

Growth is expected to accelerate to 3.6% in 2015, compared with 3.8% previously.

The Reserve Bank last month admitted for the first time in nearly a year that it had considered a cut to try to boost weakening growth.

Nomura emerging markets expert Peter Attard Montalto said earlier this week that he sees the interest rate unchanged, because the size of risk is increasing to the dovish side on growth and to the hawkish side on inflation.

Economists surveyed by Reuters also expected the Sarb to hold the benchmark repo rate.

The Reserve Bank is likely to keep lending rates at current four-decade lows well into next year, as it balances inflation risks from a weaker currency against sluggish economic growth, Reuters reported.

 - Fin24, Reuters

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