Interest rates unchanged

2013-03-20 12:58

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The South African Reserve Bank (Sarb) has left its benchmark interest rate unchanged at 5.0%, citing concerns about rising food prices, inflation and a depreciating rand exchange rate in a period of slowing growth.

The prime lending rate thus remains at 8.5%.

The decision follows an unexpected surge in headline consumer inflation to 5.9% year-on-year in February, from 5.4% in January.

Data from Statistics SA released earlier today also showed inflation increasing 1.0% on a month-on-month basis in February, compared to 0.3% in January. Economists had expected inflation to come in at 5.6% year-on-year and 0.8% month-on-month in February.

Sarb Governor Gill Marcus expressed concern about the affect of the Eskom tariff hike on inflation, with the central bank estimating inflation to average 5.9% this year.

The rand exchange rate is still posing the biggest threat to inflation, she said.

According to her, the rand is expected to remain volatile amid local and global economic turmoil.

The bank forecast growth for this year at 2.7%, below potential growth of 3.3%, Marcus said.

Marcus said labour strife in the mining sector still poses growth risks.

She said the petrol price remains an upside risk. The pump price of petrol increased by R1.24 a litre since the beginning of the year and is expected to go up again in April.

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