SA's repo interest rate was currently 5.5%, while the prime rate was 9.0%. Disappointing figures include those for manufacturing, retail trade and GDP.

Growth in the economy's second biggest sector, manufacturing, has been less than satisfactory due to factors such as waning global activity and disruptions caused by strike action.

Manufacturing production rose 0.9% year on year (y/y) in June from a 1.0% y/y growth in May, official figures showed.

The demand side of the economy also showed strain. Retail trade sales, an important indicator of consumer expenditure, recorded growth of 2.2% y/y in June after a 0.2% y/y growth in May.

Lower than expected local growth figures also contributed to the changes in interest rate outlooks. SA grew 1.3% in the second quarter of 2011 compared to 4.5% in the first.

Standard Bank economists recently revised their interest rate outlook from a 50 basis point rate hike in the first quarter of 2012 to the third quarter of 2012.

Economists also adjusted their expectations for the number of rate hikes that would occur.

"We now expect a total of 200 bps [basis points] by the end of 2013, in contrast to our previous expectation of 200 bps in 2012 and a further 100 bps in 2013," the economists said.

In light of rising inflation, the SA Reserve Bank (SARB) would normally be inclined to start raising interest rates. However the current fragility of both global and local growth prevented this.

On its own, the recent rise in inflation to 5.3% y/y in July from 5.0% in June would have bolstered the case for rate tightening, according to Adenaan Hardien, chief economist at Cadiz asset management.

"Given ongoing concerns about the fragility of global activity, the inflation tolerance is certainly higher," he said.

The challenge for the SARB was that inflation was rising and likely to be above the 3% to 6% inflation target band in the fourth quarter of 2011, while economic growth was slowing, noted Kgotso Radira, economist with Investec Group Economics.

"We believe that on the back of deteriorating growth prospects, the SARB will leave interest rates unchanged for an extended period, with the first interest rate hike only likely in H1.12 [2012 first half]," Radira said.

Cadiz changed their rate call to one where the SARB left the repo rate unchanged over the next twelve months.

Johan Rossouw, Vunani Securities group economist said they still expected the domestic reference interest rate to remain unchanged for "an extended period", possibly throughout 2012.

Analysts forecast the bank's Monetary Policy Committee would keep lending rates on hold at its next meeting scheduled to start on 20 September.