Johannesburg - South Africa’s central bank left its benchmark lending rate unchanged as a rally in the rand tempered concerns over rising inflation.
The Monetary Policy Committee left the repurchase rate at 5.5 percent, Governor Gill Marcus told reporters in Pretoria today, matching the forecasts of 17 of 22 economists surveyed by Bloomberg.
The others expected a rate increase of between 25 basis points and 50 basis points.
The rand has gained 5.7 percent against the dollar since policy makers raised the key rate on January 29 for the first time in more than five years, allowing the bank to adopt a more gradual approach in raising borrowing costs.
While inflation threatens to breach the central bank’s 3 percent to 6 percent target, Marcus is seeking to shore up an economy that expanded at its slowest pace last year since a 2009 recession.
“The rand regained some lost ground, easing some pressure on the inflation outlook, while domestic economic prospects remain weak,” Mohammed Nalla, head of strategic research at Nedbank’s investment-banking unit in Johannesburg, said in a note to clients before the decision.
A weaker rand and sustained breach of the inflation target may prompt the MPC to increase borrowing costs in May, he said.
Consumer inflation accelerated to 5.9 percent in February, remaining within the bank’s target for a fifth month.
The core inflation rate, which excludes food, non-alcoholic beverages, gasoline and energy costs, has stayed at 5.3 percent since September.
The rand plunged 22 percent against the dollar last year and a further 5.7 percent in January, worsening the inflation outlook and prompting the central bank to raise the key rate by half a percentage point in January.
Policy makers in emerging markets such as Turkey and India may be pausing after tightening monetary policy in January to help bolster their currencies.
Turkey’s central bank kept its three benchmark interest rates unchanged on March 18, while the Reserve Bank of India will probably leave its repurchase rate unchanged at 8 percent on April 1, according to 22 of the 23 analysts surveyed by Bloomberg. - Bloomberg News