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Sarb keeps interest rates unchanged

The central bank has kept rates on hold since July 2014 but rising inflation could change this.

Reserve Bank governor Lesetja Kganyago at his appointment in Pretoria on 06 October 2014. Picture: Reinart Toerien/EWN.

JOHANNESBURG - South African Reserve Bank (Srab) Governor Lesetja Kganyago has announced that interest rates will remain unchanged.

He made the revelation in Pretoria on Thursday following a two-day meeting of the bank's monetary policy committee (MPC).

This nears the repo rate, the rate at which the central bank borrows money to banks, will stay on hold at 5,75 percent. The prime lending rate, the interest charged by banks to clients, will stay fixed at 9,25 percent.

Kganyago says the South African economy is stable but electricity, wage settlements and a volatile rand threaten the country's inflation outlook.

"The persistence of medium-term inflation at elevated levels and the deteriorating risks to the outlook are an increasing concern to the MPC."

The governor says the inflation rate is vulnerable and should breach the central bank's target range ceiling of six percent in 2016.

The bank's primary mandate is to keep inflation within the three to six percent band.

The MPC appears to be almost divided on the issue of rates, with two members voting in favour of a 25 basis points hike, with four against.

Srab has kept rates on hold since July 2014, when it upped the repo rate by 25 basis points.