Thursday, the South African Reserve Bank lowered its repurchase rate by 100 basis points to 8.5% per annum with effect from May 4.

In March, the central bank had reduced the key rate by 100 basis points from 10.5%.

Adverse economic conditions continue to tilt the balance of risks to the inflation outlook to the downside over the medium term, the central bank said in a statement.

The central bank forecasts consumer price inflation to average 5.4% by the end of 2010. According to the inflation expectation survey conducted by the Bureau for Economic Research at Stellenbosch University in the first quarter of 2009, average CPI inflation expectations for 2009 declined compared to the previous survey.

According to the survey respondents, inflation will average 8% 2010, up from the 7.5% measured in the previous survey. While analysts expect inflation to average 5.4% in 2010, business executives and trade union officials expect it to average 8.6% and 10.1% respectively. Inflation is expected to moderate to 7.8% in 2011.

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