S. Africa repo rate remains unchanged at 7 pct

The South African Reserve Bank (SARB) left its benchmark repo rate unchanged at seven percent on Thursday, saying inflation pressures left the bank room to pause in its tightening cycle.

Pressed with ever-increasing fuel and food prices, consumers may have a sigh of relief for a while, as the bank is expected to hike the rate on its next meeting.

The bank kept the rate unchanged as expected by many economists.

The bank has raised the rate by a cumulative 75 basis points since the beginning of the year to put the repo rate at seven percent.

"The MPC (Monetary Policy Committee) could have been cognisant of softer inflation prints and the strengthening of the rand to put the repo rate unchanged," BNP Paribas Securities economist Jeff Schultz told Xinhua in a telephone interview.

Rand was under pressure after the announcement of repo hikes. The rand weakens steadily, now trading at R15.89 to the dollar.

The SARB has been battling to contain inflation at expected target range of three percent and six percent in 2018. The rate remains sensitive to political developments, said SARB Governor Lesetja Kganyago.

The sluggish economic growth is disappointing, and recovery is likely to be slow, Kganyago said.

"The bank now expects food price inflation to peak at around 12 percent in the final quarter of this year. However, should food prices stabilise or decline later in the year, there is the potential for downside base effects next year," Kganyago said.

The latest inflation forecast is that there will be some improvement in the medium term. Inflation expected to average 6.7 percent in 2016, the governor said.

"We fear that these consumers are already being squeezed too much," Ian Wason, chief executive of DebtBusters, said.

According to the governor, the bank was not expected to revert back on its March view that inflation would remain outside the inflation target until the third quarter of 2017, although consumer inflation had moderated slightly. Enditem