South Africa's Reserve Bank left the repo rate unchanged at 5.5% on Thursday as expected, citing inflation concerns and despite lowering its economic growth forecasts. The majority of 26 economists polled by Reuters saw the rate holding steady, with just two expecting a 50 basis point cut to 5.0%, which would have been a new all-time low. The Bank's monetary policy committee remained of the view that underlying inflation pressures were of a cost push nature and that the subdued state of domestic demand and output would contribute to core inflation remaining contained, Governor Gill Marcus told a media briefing. "However the Committee is concerned that the change in the profile of the inflation forecasts, and the extended breach of the upper end of the inflation target range, may impact adversely on inflation expectations," she said. Food prices continued to pose an upside risk to the inflation outlook, and a further acceleration of food inflation was expected in the near term. The Bank slashed rates by a cumulative 650 basis points in the two years to November 2010, but has kept them on hold at all its six policy meetings this year, partly on concerns about rising inflation. Marcus said the seven-member MPC discussed a rate cut, but that no one in the group advocated for it. Slightly below half of the economists in the Reuters poll saw the Bank resuming monetary tightening in the latter half of next year, but nine expected rates to be unchanged at 5.5% by the end of 2012, with increases only expected from early 2013. Economic growth remains sluggish and the government revised its forecasts for the next three years downwards in October from the levels seen in February, backing the case for rates to stay at three-decade lows for longer. "The domestic economic recovery remains hesitant. The relatively weak economy has ensured that demand pressures on inflation are restrained at this stage," Marcus said. "Nevertheless exogenous supply-side factors have resulted in a deterioration of the inflation outlook, with a more protracted breach of the inflation target expected in 2012." www.engineeringnews.co.za