South African Reserve Bank Holds Rate at 5.50%

The South African Reserve Bank [SARB] held its monetary policy interest rate, the repo rate, unchanged at 5.50%.  The Bank said: "The MPC is not complacent and will remain vigilant and continue to monitor closely any indications of second-round effects on inflation emanating from these cost pressures as well as the changing risk profile of the inflation outlook." On inflation the SARB said: "The view of the MPC continues to be that the underlying inflation pressures are mainly of a cost push nature, notwithstanding signs of a possible moderate increase in underlying inflation."

Previously the SARB also held the repo rate unchanged at its May meeting this year, the Bank last cut the repo rate by 50bps to 5.50% in November 2010.  South Africa reported annual inflation of 5% in June, up from 4.6% in May, and 4.2% in April this year.  The Bank noted "Food and oil price developments remain the major risks to the inflation outlook."  The SARB is forecasting inflation to average 6.3% in the first quarter of 2012, compared to its official inflation target range of 3-6%.

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