* Reserve Bank did not discuss lifting rates
* Weaker rand poses inflation risks
(Changes dateline, adds details, analyst comments)
By Stella Mapenzauswa
PRETORIA, March 20 South Africa's Reserve Bank
left the repo rate at historical lows on Wednesday, saying
concerns about weak growth in Africa's biggest economy were
offset by a deterioration in the inflation outlook caused a
sharply weaker currency.
However, Governor Gill Marcus made clear she would not be
stepping in to stem a 9 percent depreciation in the rand
this year, disappointing some analysts who had been
expecting a more aggressive stance to defend the currency.
The rand fell to a four-year low of 9.3075 an hour after the
decision from 9.2280 before Marcus announced the outcome of the
bank's three-day monetary policy meeting, at which she said
there was no discussion of increasing rates from 5.0 percent.
"There was a total lack of talking up of the rand, which
surprised us and the market," Nomura economist Peter Attard
All 21 economists polled by Reuters last week forecast the
repo rate unchanged, with the majority seeing it staying that
way for the rest of the year.
Marcus also stressed the benefits to the manufacturing
sector of a weaker rand - pro-growth comments that will be music
to the ears of President Jacob Zuma and the ruling African
National Congress as it heads towards an election in 12 months'
The bank has kept the repo rate on hold since the last 50
basis point cut last July, balancing the need to nurture a
sluggish recovery from a 2009 recession with price pressures
emanating from a weaker currency.
Earlier this month, Marcus admitted the bank's ability to
further loosen policy was constrained by the need to keep
inflation within a 3 to 6 percent target band.
"The Monetary Policy Committee continues to assess the
balance of risks to the inflation outlook to be on the upside,
mainly due to the exchange rate and wage pressures," Marcus told
a news conference.
The rand has been heavily sold this year, weighed down by a
yawning currency account deficit, wage-related strikes in the
farming and mining sectors, and fears for the stability of the
Figures released two hours before Marcus' decision showed
consumer inflation accelerated above expectations to 5.9 percent
year-on-year in February from 5.4 percent in January.
Growth prospects also remained subdued, Marcus said, lifting
the bank's forecast for 2013 only slightly to 2.7 percent this
year, in line with the Treasury.
"Upside inflation risks will prevent a cut, and at the same
time, economic growth is likely to remain too weak to be
considering rates hikes anytime soon," Renaissance Capital
economist Elna Moolman said.
Government bond yields rose after Marcus's speech, with the
yield on the 2026 paper climbing to 7.5 percent from
7.485 percent while that for the 2015 bond rose to
5.52 percent from 5.475 percent.
(Additional reporting by Johannesburg newsroom; Editing by Ed
Cropley, Ron Askew)