RTTNews - Thursday, South Africa' central bank unexpectedly lowered its key interest rate to 7% from 7.5%, saying that the domestic economy is lagging behind the international developments.

In its previous rate-setting session, which was in June, the central bank held its key rate unchanged at 7.5%.

Central bank Governor Tito Mboweni said there are encouraging signs that the global slowdown may have reached its lower turning point, although the speed and extent of the recovery are still subject to a high degree of uncertainty.

The South African economy appears to be lagging behind these international developments and it is likely that the domestic economy contracted in the second quarter of this year, Mboweni said.

The domestic economy remains constrained by weak global and domestic demand, he said.

Moreover, the governor noted that the monetary policy committee is of the view that, notwithstanding upside cost pressures, the adverse economic conditions appear to tilt the balance of risks to the inflation outlook towards the downside over the medium term.

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