South African Reserve Bank Holds Interest 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 Committee assesses the risks to the inflation outlook to be on the upside mainly due to cost push pressures. The exchange rate is also seen to pose some upside risk to the outlook, while downside risks are seen to come from possible contagion effects from the European crisis and associated slow growth. The committee is aware of the dangers of a disorderly resolution of the crisis and the systemic implications for the global and domestic economy, and remains ready to act appropriately should the need arise."


Previously the SARB also held the repo rate unchanged at its September meeting this year, the Bank last cut the repo rate by 50bps to 5.50% in November 2010.  South Africa reported annual inflation of 5.7% in September, 5.3% in August and July, 5% in June, 4.6% in May, and 4.2% in April this year, compared to its official inflation target range of 3-6%. 

South Africa's economy grew 1.3% in the June quarter, while the SARB is forecasting 2011 growth of 3.2%.  The South African Rand (ZAR) has weakened by about 22% against the US dollar so far this year, with the USDZAR exchange rate last trading around 7.89

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