South Africa cuts interest rates

JOHANNESBURG — The South African Reserve Bank has cut a key interest rate by a half percentage point to 11.5 percent in a bid to stimulate the flagging economy.

Reserve Bank govenor Tito Mboweni said Thursday's move took into account the global economic downturn and its negative impact on the South African economy. About 20 countries have now cut interest rates.

It marks the first time in three years that the bank's repurchase rate has been cut. There have been six rate hikes since June 2007 as the bank tried to control inflation and consumer spending.

The government expects inflation, currently at 12 percent, to fall back to its 3-6 percent target by the third quarter of next year. But the impact of the fluctuating rand — which has recently lost more than 10 percent against the dollar — is uncertain.

Business Unity South Africa, which represents big business, said the cut would send a positive message to consumers and industry that further cuts might follow.

Real estate companies also hailed the reduction as welcome relief to the slumping property market, but said a full percent point would have been better.

But the Confederation of South African Trade Unions said the reduction was much too modest.

"They have missed a great opportunity to make a substantial cut in interest rates, which could have helped to counter the massive danger of retrenchments and an economic slump in the wake of the world economic meltdown," it said.

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