South African Reserve Bank cuts repurchase rate by 50 bps to 6%

By Richard Connell

New York, Sept. 9 - The Monetary Policy Committee of the South African Reserve Bank lowered its repurchase rate by 50 basis points to 6% at its meeting on Thursday, according to a news release issued by the bank.

The inflation rate measured by the CPI on a year-over-year basis declined to 3.7% in July compared to 4.6% in May, due mostly to weaker domestic demand conditions.

The committee revised its inflation forecast downwards, with the new expectations being 3.7% in the third quarter of 2010, 4.8% in 2011 and 5.1% in the last quarter of 2012.

The committee noted that the global economic outlook is still characterized by uncertainty, with risks remaining high concerning the European sovereign debt crisis and weak demand in many advanced economies.

Economic growth in South Africa was lower than expectations in the second quarter of 2010, and looking forward the committee expects it to remain below potential for the current forecast period.

Assessing that the improved inflation outlook creates room for a policy cut to provide stimulus to the recovery of the domestic economy, the committee reduced the rate to 6%.

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