In a widely expected move, SA Reserve Bank governor Lesetja Kganyago confirmed that the Monetary Policy Committee had elected to keep the repo rate unchanged at 8.25%.

Four Monetary Policy Committee (MPC) members preferred an unchanged stance and two preferred a reduction of 25 basis points. MPC members agreed that the restrictive policy was appropriate to stabilise inflation at 4.5%, given the inflation risks.

"Economic performance in the first half of the year was disappointing. The economy contracted slightly in the first quarter, by 0.1%, and recent data, including last week's mining and manufacturing numbers, have caused us to trim our second quarter growth estimate modestly, to 0.6%.

"Over the medium term, we expect somewhat faster growth, supported by a more reliable electricity supply and improving logistics, among other factors," Kganyago said. However, he tempered this with the proviso that the revised growth projections remained below longer-run historical averages, of about 2%.

Inflation expected to dip

Inflation came in at 5.2% for May, unchanged from April and still at the upper end of the 3% to 6% target range. The Reserve Bank is now expecting headline consumer price inflation for this year to be 4.9%, compared with 5.1% at the previous meeting. Over the next few quarters, headline inflation is expected to dip below the 4.5% midpoint, mainly because of fuel and food prices. This outlook is...