Mboweni keeps South African interest rates unchanged

SOUTH Africa’s central bank left its repo rate unchanged at seven per cent Tuesday, amid signs that the economy is on the mend while inflation remains above the target band, but is seen moderating.

The announcement by central bank governor Tito Mboweni came some six hours after official data showed annual targeted consumer inflation slowed in line with expectations to 6,4 per cent in August, although it remains above the top end of a three to six per cent target band.’The monetary policy committee is of the view that the risks to the inflation outlook appear to be fairly evenly balanced,’ Mboweni told a news conference after the policy meeting ended.’Given the current policy stance, inflation is expected to continue moderating and to return to within the inflation target range during the forecast period.’Eighteen of 25 economists polled by Reuters last week saw the key repo rate unchanged at seven per cent on inflation concerns, while a 50 basis point cut to 6.5 per cent was expected.Mboweni said inflation was likely to return on a sustained basis to the inflation target range by the second quarter of 2010.The South African Reserve Bank has slashed rates by a total of 500 basis points since December 2008 to help boost growth as the economy struggles with its first recession in 17 years.Mboweni said there were early indications that a lower turning point in domestic output may have been reached.GDP contracted by three per cent in the second quarter after shrinking 6,4 per cent in the first. -Business Report