South African Reserve Bank holds repurchase rate unchanged at 5%

By Tali David

Minneapolis, March 20 - The South African Reserve Bank's Monetary Policy Committee said it is holding the repurchase rate steady at 5%, according to a bank news release.

The committee said that since the previous meeting, the domestic inflation outlook has deteriorated slightly. Risks posed by the depreciation of the rand exchange rate have overshadowed the more favorable developments, including lower electricity price increases and some moderation in food price inflation. Nevertheless inflation is expected to remain contained within the target range apart from a temporary breach in the third quarter of 2013.

The domestic economic growth prospects remain fragile amid continued tensions in the labor market, particularly in the mining sector.

The year-on-year inflation rate as measured by the consumer price index for all urban areas was 5.9% in February, up from 5.4% in January, the bank said.

The producer price inflation for final manufactured goods measured 5.8% in January. The inflation forecast of the bank reflects a slight deterioration in the inflation outlook for 2013 compared with the previous forecast.

The committee said it continues to assess the monetary policy stance to be appropriately accommodative given the persistence of the negative output gap. At the same time, further accommodation remains constrained by the upside risks to the inflation outlook.

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