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South Africa central bank holds key rate, lowers growth outlook for next 2 years

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South Africa central bank holds key rate, lowers growth outlook for next 2 years

The South African Reserve Bank left its repurchase rate unchanged at 6.5% as it continued to flag weak economic growth prospects and fiscal risks.

The central bank said South Africa's GDP is projected to expand 0.6% in 2019, unchanged from the prior estimate. The growth forecasts for 2020 and 2021 were lowered to 1.5% and 1.8%, respectively, from 1.8% and 2.0%, previously.

After a 3.1% contraction in the first quarter, the South African economy rebounded in the second quarter with 3.1% growth.

"The [Monetary Policy Committee] assesses the risks to the growth forecast to be balanced in the near term, but remains concerned about medium term growth and weak employment prospects," said central bank Governor Lesetja Kganyago, citing global trade tensions and higher oil prices as potential headwinds to growth.

Kganyago also warned that public sector financing needs remain high, putting downward pressure on the South African rand, which has depreciated by 4.6% against the U.S. dollar since the central bank's monetary policy decision in July.

On inflation, the central bank said the overall risks to the outlook were "largely balanced."