S. Africa keeps repo rate steady at 7.0 %

The announcement by central bank Governor Tito Mboweni came some 6 hours after official data showed annual targeted consumer inflation slowed in line with expectations to 6.4 percent in August, although it remains above the top end of a 3-6 percent 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 7.0 percent on inflation concerns, while 7 expected a 50 basis point cut to 6.5 percent.

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 3.0 percent in the second quarter after shrinking 6.4 percent in the first.

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