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Pretoria - The South African Reserve Bank's monetary policy committee has cut the key repo rate by 50 basis points, bringing it down to 11.5%, with the prime lending rate dropping to 15%.
This is the first time in 14 meetings that the rate has been cut since June 2006; at the other meetings, the rate was thrice kept on hold, and raised by 50 basis points each time in the rest.
The decision was in line with the consensus forecast by economists surveyed by I-Net Bridge. Of the 16 economists polled, nine expected a 50 basis point reduction, while two are expected a cut of 100 basis points. Five economists spoken to expected rates to remain unchanged.
South African Reserve Bank Governor Tito Mboweni said in late November that the inflation outlook had improved and it was hoped that an easing since August was the start of a consistent downward trend.
The targeted CPIX inflation slowed to 12.4% year-on-year from 13.0% and factory gate inflation fell to 14.5% from 16.0% previously.
Inflation broke through the Reserve Bank's 3%-6% target range for CPIX - the consumer inflation rate excluding mortgage interest rates - in April 2007. Driven by high food, fuel and electricity prices, inflation hit a peak of 13.6% in August.
Economists expect that CPIX inflation will return within its target range in the latter half of 2009.
- Fin24