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Cape Town - South African Reserve Bank (Sarb) governor Lesetja Kganyago has announced no change in the interest rate on Thursday.
"The MPC felt that there is some room to pause in this tightening cycle and accordingly decided to keep the repurchase rate unchanged," he said.
See how the announcement unfolded.
This means the repo rate, which is the interest rate at which the Sarb lends money to commercial banks, remains at 7%. The cost of borrowing stays at 10.5%.
The Sarb's monetary policy committee has raised the interest rate by a total of 100 basis points since November last year.
Most economists expected the Sarb to hold rates now, but anticipate further hikes later in the year.
Kganyago said although the MPC remains focused on its inflation mandate, it is also sensitive to the extent possible to the state of the economy.
"The MPC will not hesitate to act appropriately should the inflation dynamics require a response, within a flexible inflation targeting framework."
Headline consumer price index (CPI) inflation moderated since February, but Kganyago cautioned that the respite is expected to be temporary, as food and petrol price pressures continue to intensify.
The year-on-year inflation rate as measured by the CPI for all urban areas moderated after reaching a high of 7.0% in February. In March and April, CPI inflation measured 6.3% and 6.2%. Food price pressures continued unabated, with food and non-alcoholic beverages inflation accelerating to 11.0% in April, up from 9.5% previously. Goods price inflation moderated from 6.9% to 6.7%, while services price inflation was unchanged at 5.7%.
Kganyago noted that the domestic economic growth continues to disappoint.
"While there are signs that the economy may be reaching the low point in the growth cycle, the recovery is expected to be slow with downside risks."
He said Sarb’s GDP growth forecast for 2016 has been trimmed down from 0.8% to 0.6%.
"While a recovery is still expected in the next two years, the forecasts for both these years have been revised down by 0.1 percentage point to 1.3% and 1.7%. With the estimates of potential output unchanged, the output gap is expected to widen over the forecast period," said Kganyago.
