Marcus Says Holding Rate as Difficult as Earlier Decisions

South African Reserve Bank Governor Gill Marcus said the decision to keep interest rates unchanged last month was as difficult as any of the central bank’s recent policy announcements.

“The global economy remains a source of extreme uncertainty, while the domestic economy is beset by its own challenges,” Marcus said in a speech to the Nordic-South African Business Association in Johannesburg today.

The Reserve Bank, which cut its benchmark repurchase rate for the first time in 20 months in July to spur the economy, held the rate at 5 percent last month as price pressures gained. Economic growth is coming under pressure as a debt crisis in Europe and mining strikes cut exports in Africa’s biggest economy.

“As with all of our deliberations on the Monetary Policy Committee, this decision to keep rates at the current level was not an easy one,” Marcus said.

Inflation expectations are “anchored” at the upper end of the central bank’s 3 percent to 6 percent target range, with rising food and fuel costs the main risks to inflation, Marcus said. The inflation rate rose to 5 percent in August from 4.9 percent in the previous month.

“We expect consumer prices in South Africa to remain contained within the target range over the forecast period,” Marcus said.

Bonds climbed after Marcus’s comments. The yield on the R157 bond due 2015 fell 9 basis points, or 0.09 percentage point, to 5.37 percent. The rand was at 8.3883 against the dollar as of 4:27 p.m. in Johannesburg from 8.3349 before the governor began speaking.

Investors had pared bets the central bank will lower interest rates again after a report on Sept. 11 showed the current account deficit posted its biggest deficit in almost four years in the second quarter.

To contact the reporter on this story: Andres R. Martinez in Johannesburg at

To contact the editor responsible for this story: Nasreen Seria at

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