afrol News, 14 August - The outgoing South African Reserve Bank (SARB) Governor, Tito Mboweni yesterday announced a cut of 50 basis points to the interest rate, a move that has been said was unexpected from economists across the country.

"The MPC has decided to reduce the repurchase rate by 50 basis points to 7 percent per annum with effect from 14 August 2009," said Governor Mboweni.

Speaking at the end of a two-day MPC meeting in Pretoria, Mr Mboweni said although there were encouraging signs that the economic meltdown may have reached its turning point, the South African economy appeared to be lagging behind.

"It is likely that the domestic economy contracted in the second quarter of this year. The domestic economy remains constrained by weak global and domestic demand," he said.

He also said inflation had declined materially outside the inflation target range, which is between 3 and 6 percent, saying cost push pressures appeared the main source of upside risk to the inflation outlook.

On the outlook for inflation, Mr Mboweni said that CPI inflation was expected to continue its moderate downward trend and was likely to return to the targeted range in the second quarter of 2010.

Economists had expected the MPC would leave the repo rate unchanged, as was the case in July. The bank has made several cuts since the fall of 2008 on the repo rate by more than 450 basis points.

By staff writer

© afrol News

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