The South African Reserve Bank (SARB) left interest rates unchanged on Tuesday.

"The Monetary Policy Committee (MPC), having reviewed the global and domestic economic and financial developments, has decided to maintain the current stance of monetary policy and to leave the repurchase rate unchanged at seven percent per annum," newly-appointed governor Gill Marcus said.

This means that the prime rate remains at 10.5 percent.

Marcus said that while South Africa had experienced a recession, it had narrowly avoided a depression due to the fiscal and monetary policy measures in place.

She said the global economy had begun its recovery, led by emerging Asian economies.

However, she said the turnaround in the advanced economies was less certain.

"While there are positive signs, the recent higher growth rates have been driven by a turn in the inventory cycle, and the continued weakness in consumption expenditure in the United States in particular, and rising levels of unemployment pose risks to the recovery."

Marcus said the nature and speed of exit strategies from the previous stimulus packages also remained a risk to the outlook.

She noted that the signs were there that the domestic economy would continue on its recovery path, but economic growth was expected to remain below potential for some time.

"Most forecasts suggest that positive growth will have resumed by the fourth quarter of 2009, but there is less unanimity about the third quarter outcome.

"The forecasts for the third quarter vary wildly from contraction to recovery," she said.

"But the outlook is much more positive in 2010 and beyond."

Sapa

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