UPDATE 1-South African central bank unexpectedly cuts lending rate

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PRETORIA, Jan 16 (Reuters) – South Africa’s central bank unexpectedly cut its main lending rate by 25 basis points to 6.25% on Thursday after lowering its inflation forecast.

The rate cut was a unanimous decision and the first drop since July last year.

The rand briefly weakened after the cut was announced before recovering to trade flat on the day.

The majority of analysts polled by Reuters had expected no change in rates.

“The lower inflation forecast and improved risk profile opens some space to provide further policy accommodation to the economy,” central bank governor Lesetja Kganyago told a news conference.

The South African Reserve Bank (SARB) tries to anchor inflation near the midpoint of its 3-6% target range.

Inflation has been benign in the past year, in part due to weak economic growth.

The SARB cut its 2020 inflation forecast to 4.7%, versus 5.1% at its last rate decision in November. It also lowered its economic growth forecast for 2020 to 1.2% from 1.4%. (Reporting by Olivia Kumwenda-Mtambo and Emma Rumney; Writing by Alexander Winning and Joe Bavier; Editing by Tim Cocks and Andew Cawthorne)

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