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South Africa keeps rates flat as inflation risks balanced

Reuters) – South Africa’s central bank kept its main lending rate at 3.5% on Thursday, saying overall risks to the inflation outlook appeared to be balanced in the near and medium term.

Three members of the monetary policy committee wanted to hold the repo rate and two preferred a 25 basis point cut, Governor Lesetja Kganyago said.

“The committee notes that the slow economic recovery will help keep inflation below the midpoint of the target range for this year and next,” Kganyago added, referring to the bank’s 3% to 6% target range.

The South African Reserve Bank cut interest rates by a cumulative 300 basis points last year to cushion the impact of the COVID-19 pandemic.

Inflation in Africa’s most industrialised economy has been benign, giving the bank space to be accommodative.

“Monetary policy has eased financial conditions and improved the resilience of households and firms to the economic implications of COVID-19,” Kganyago said.

“Economic and financial conditions are expected to remain volatile for the foreseeable future. In this highly uncertain environment, policy decisions will continue to be data dependent and sensitive to the balance of risks to the outlook.”

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