SARB holds rates, shrugs off union pressure

South Africa's central bank left its repo rate steady at 7% on Tuesday, as expected, on signs the economy is on course to exit recession and on worries high power price rises will feed price pressures.

Under new Governor Gill Marcus, the central bank's monetary policy committee kept the cautionary stance it had adopted under previous Governor Tito Mboweni, defying calls from leftist allies of the ruling ANC to slash interest rates aggressively.

The Bank left interest rates unchanged for a third meeting in a row, after reducing the repo rate by 500 basis points between December last year and August to help stimulate an economy in its first recession in 17 years.

Marcus said the local economy could exit the recession in the fourth quarter but growth will be 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."

Manufacturing output figures and new car sales number have indicated the worst of the recession may be over and a recovery is underway, although it is expected to be slow.

Twenty-four of the 28 economists polled by Reuters saw the central bank leaving the repo rate unchanged, while four forecast a 50 basis point cut for the repo rate to 6.5 percent.