SARB leaves repo rate unchanged

19th January 2012 By: Sapa

The SA Reserve Bank has left the repo rate unchanged at 5.5 percent, governor Gill Marcus said on Thursday.

The prime rate would stay at nine percent.

"The MPC [Monetary Policy Committee] maintains a preference for a stable interest rate environment given the conflicting pressures on monetary policy at this stage," Marcus said in Pretoria.

The MPC would continue to monitor domestic and global economic and financial developments and the risks to the outlook, she said.

"[It] remains ready to act appropriately to ensure the attainment of the inflation target over the medium term while being supportive of the domestic economy."

The SARB inflation target of between three and six percent was breached in November last year.

"Inflation is now expected to remain above the upper end of the target range for a more extended period," Marcus said.

The MPC had revised its inflation forecast upward and now expected it to remain outside the upper end of the target range for the whole of 2012.

Marcus said inflation should peak at around 6.6 percent in the second quarter of this year and return to within the target range in the first quarter of 2013.

"Inflation is expected to measure 5.5 percent in the final quarter of 2013," she said.

The MPC had revised its economic growth forecasts down from its previous meeting in November mainly due to downward revisions of global growth.

"The outlook for domestic economic growth remains subdued," Marcus said.

"The primary reason for the worsening domestic growth outlook is the risk of contagion from the persistent crisis in Europe, which shows no sign of a speedy resolution."

The annual real growth rate for 2011 was estimated to be around 3.1 percent.

"Growth in 2012 is expected to average 2.8 percent compared with 3.2 percent in the previous forecast, while the forecast for growth in 2013 has been revised down from 4.2 percent to 3.8 percent."

Holding the repo rate at 5.5 percent was in line with market expectations, with all 21 economists polled by Bloomberg expecting rates to remain unchanged.

This was the seventh consecutive meeting where the repo rate remained unchanged after it was reduced by 650 basis points between mid-2008 and December 2010. It keeps the rate at its lowest level in over 30 years.

The decision followed a three-day meeting of the MPC in Pretoria.