South African Reserve Bank reduces repurchase rate by 50 bps to 6½%

By Richard Connell

New York, March 25 - The Monetary Policy Committee of the South African Reserve Bank lowered its repurchase rate by 50 basis points to 6½% at its meeting on Thursday, according to a news release issued by the bank.

The committee noted that inflation in South Africa returned to the inflation target range sooner than forecast when it measured 5.7% in February 2010.

Looking forward, the committee forecast an improved outlook, with inflation averaging 5.3% in 2010 and 5.4% in 2011, hitting a low point of 4.9% in the third quarter of 2010.

The committee stated that the economic growth outlook has improved in the past several months, with a 3.2% annualized growth rate recorded in the fourth quarter of 2009, and forecast growth to average 2.6% in 2010.

The committee concluded that the economy has emerged from the recession, but the committee warned the pace of recovery could be slow.

Assessing the improved inflation outlook has provided room for monetary policy to help sustain the recovery, the committee opted to cut the interest rate to 6½%.

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