By Richard Mantu, tel: (012) 314-2419

The South African Reserve Bank has reduced the repo rate by 50 basis points to seven percent, in a move Governor Tito Mboweni explained as contributing to economic growth in the country.

"The MPC [Monetary Policy Committee] has decided to reduce the repo rate by 50 basis points to 7.0 percent per annum with immediate effect," said Mr Mboweni.

This means that the interest rate drops to 10.5 percent.

Speaking after the two-day MPC meeting in Pretoria today, Mr Mboweni said the inflation outlook was positive for CPIX inflation to remain within the 3-6 percent target range for next two years, despite recent high oil prices.

However, Mr Mboweni said the MPC noted the recent "slackening in activity in some sectors of the economy" as a result of the rand trading higher, which prompted the MPC to cut rates to contribute towards stimulating economic activity at such sectors.

"When inflation is under control, the central bank has room to manoeuvre to contribute towards the economy," said Mr Mboweni.

He said the MPC was of the view that a competitive and stable exchange rate would contribute to continuing sustainable growth in output and employment. - BuaNews