Johannesburg - The South African Reserve Bank's (Sarb's) monetary policy committee (MPC) has left the key repo rate unchanged at 7.5%.

This means that the prime lending rate will remain at 11%.

The repo rate is the rate at which the central bank lends to other banks, while the prime lending rate is the benchmark rate at which banks lend to customers.

The announcement came after the consumer price index (CPI) eased to 8.0% in May compared to the same month last year, down from 8.4% in April. Earlier on Thursday, the producer price index (PPI) showed deflation of 3% in May 2009, compared to the same month last year.

Economists argued that falling inflation - although still above the Reserve Bank's target of 3% to 6% - would have nudged the MPC towards a further rate cut.

"PPI inflation came out much lower than expected," said Investec economist Annabel Bishop prior to the interest rate announcement. "We continue to believe Sarb will cut interest rates by 50 basis points on Thursday and 50 basis points in August."