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South African interest rates remain unchanged

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South African interest rates remain unchanged

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The South African Reserve Bank's (Sarb's) monetary policy committee (MPC) has left the key repo rate unchanged on Thursday at 6.5%, with the prime lending rate steady at 10%.

The repo rate is the rate at which the central bank lends to other banks, while the prime lending rate is the benchmark rate at which banks lend to customers.

The decision to leave rates unchanged had been expected, according to a survey of 11 leading economists polled by I-Net Bridge.

Against expectations, there was a cut in March, but the MPC kept interest rates on hold in May. It said at the time inflation forecasts indicated a slightly improved outlook compared with that presented at the previous meeting, with lower projected inflation for 2010 and 2011.

Efficient Financial Holdings [JSE:EFF] economist Freddie Mitchell said concern about inflation prospects probably swayed the MPC to keep rates unchanged.

"She (Sarb governor Gill Marcus) made a lot of comment around the weakness in the global economy, that the growth potential is low and that consumer demand remains weak within the local market,"said Mitchell. "Cost push pressures, especially higher wage increases, was the main reason behind them keeping rates on hold."

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