By Gabriele Steinhauser

PRETORIA, South Africa--The South African Reserve Bank on Tuesday kept its main repo rate unchanged at 7%, after saying it now expects the economy to grow at a slightly lower rate this year, while inflation will remain above target.

Governor Lesetja Kganyago said the decision was taken unanimously.

South Africa's economy--the most developed one on the continent--is expected to expand 1.1% this year, down from a previous forecast of 1.2% growth, the bank said. While that gross domestic product expansion is above the 0.4% estimated for 2016, it lags behind annual population growth of 1.7%--meaning that the average South African is getting poorer.

At the same time, consumer prices continue to rise at a faster-than-desired pace.The bank now expects inflation to remain above its 3% to 6% target range until the fourth quarter, rather than declining below 6% in the second quarter. For all of 2017, inflation is expected to be 6.2%, compared with a previous forecast of a 5.8% price increase. Inflation in 2016 averaged 6.4%.

The faster-than-expected pace of inflation is mostly due to higher international oil prices, which have driven up the price of fuel in South Africa, as well as persistently high food prices, the bank said.

However, Mr. Kganyago said that the longer-term outlook is more or less unchanged. In 2018, the bank still expects prices to rise by 5.5%.

Write to Gabriele Steinhauser at gabriele.steinhauser@wsj.com

(END) Dow Jones Newswires

January 24, 2017 08:54 ET (13:54 GMT)

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