South Africa’s Reserve Bank has slashed interest rates once again, as expected, by 100 basis points to take the repo rate to 8.5%, as it warned that any recovery is likely to be gradual.

“Despite a generally positive response to the G-20 summit in April, it has become increasingly accepted that the slowdown is likely to be severe and protracted, and that the global recovery is likely to be gradual,” said the Monetary Policy Committee (MPC) in a statement.

The MPC also said that it expects a near-term deterioration in inflation, with an average of 5.4% at the end of the forecast period in the final quarter of 2010.

Commenting on the decision, Standard Bank highlighted the MPC’s comment regarding inflation, noting that the outlook remains largely unchanged from the previous MPC meeting.

“This is an important signal, as the Bank has previously alluded to the importance of a favourable medium-term inflation prognosis dictating the pace of monetary policy relief. These comments augment our expectations for further interest rate easing in May and possibly in June,” said Standard Bank in response.

The central bank has been cutting rates since the end of last year, in line with moves around the world following the global financial crisis. The bank had hiked the repo rate by 500 basis points between June 2006 and June 2008 as it sought to rein in inflation.