Why Marcus held the line

South Africans can breathe a sigh of relief that Reserve Bank governor Marcus did not raise interest rates yesterday.

Speaking in Pretoria after the meeting of the bank's monetary policy committee, Marcus said the decision to keep rates unchanged was not unanimous.

Of the seven people on the committee, four felt the repo rate should stay at 5.5% (and prime at 9%), and three pushed for an increase.

Marcus and her team surprised analysts at the last meeting in January by increasing rates by half a percentage point after the cost of lending had been at a four-decade low for 18 months.

The bank targets inflation at between 3% and 6% - but it also takes other factors into account.

"The domestic economic outlook remains fragile," said Marcus.

Sluggish growth is expected for both this year and the next.

"The bank's forecast for economic growth has declined marginally to 2.6% in 2014, compared with 2.8% previously, while the forecast for 2015 has been revised down from 3.3% to 3.1%," she said.

It could be tough reaching even those levels owing to the "protracted strike in the platinum sector and electricity supply constraints", read the bank's monetary policy statement.

A strike by the Association of Mineworkers and Construction Union is now dragging into its 10th week, with revenue losses for Anglo Platinum, Impala Platinum and Lonmin reaching a combined R10.4-billion. Amcu wants the salaries of entry-level workers to more than double by 2017.

The Reserve Bank expects inflation to average 6.3% this year.

Some of the slow pressures building on inflation are being exerted by labour costs, said bank head of research Rashad Cassim.

Most economists expected Marcus to keep rates unchanged. But she was careful to point out that this pause did not mean the end of the upward cycle.

Malcolm Charles, portfolio manager at Investec Asset Management, pointed out that Marcus said any future hikes would be data dependent. "Given that economic data have stabilised since January, there was no reason for her to hike the rate now," he said.