Repo rate remains unchanged

Governor Gill Marcus has announced the repo rate will remain unchanged at five percent.

Reserve Bank Governor Gill Marcus. Picture: AFP

JOHANNESBURG - The South African Reserve Bank has decided to keep the repo rate unchanged at five percent.

The prime lending rate will also remain the same at 8.5 percent.

Governor Gill Marcus announced the monetary policy committee's decision on Wednesday afternoon in Pretoria.

She said the inflation outlook has deteriorated, although risks to domestic economic growth were on the downside.

South Africa's growth outlook has been trimmed and stands at 2.7 percent, down from the 2.8 percent forecast.

"The NPC has decided to keep the repo rates unchanged at five percent per annum. The committee will continue to apply monetary policy consistent with its mandate of price stability within a flexible inflation targeting environment."

"Inflation is expected to temporarily breach the upper end of the target range in the third quarter of 2013, when it is expected to average 6.3 percent."

Economists had predicted that rates would be left unchanged, citing low economic growth and rising inflation.

Big threats to the South African economic environment are issues like wage settlements due to collective bargaining and other issues like farm wage settlements.

The exchange rate weakness is also of deep concern to the Reserve Bank and could accelerate the inflation picture.

The good news for South Africans is that Eskom's tariff hikes will be capped at 8 percent, instead of the 15 percent proposed by the power giant.

Efficient Group Economist Dawie Roodt said uncertainty in the European market was also a concern.

"The reality is that the rand has been under tremendous pressure recently and on top of that, we have a lot of uncertainty coming from Europe all of a sudden."

(Additional reporting by Reuters)