The strong rand could threaten mining jobs

The central bank said it had reduced its key rate by half a percentage point to 8%, despite expectations it might lower rates to 7%.

Many had been hoping for a bigger cut to allow the rand to weaken against the US dollar and help exporters.

South Africa's main trade union body said it was "shocked" by the move which it said would not help job creation.

The rand has strengthened by more than 30% against the dollar this year, which has made exported goods more expensive.

In October, the mining industry warned that the rising value of the rand had put up to 120,000 jobs at risk in the sector.

Too cautious?

Reserve bank governor Tito Mboweni said the outlook for inflation was "promising" but noted there was a chance of inflationary pressures returning in 2005.

Analysts said the cautious move by the central bank probably indicated that the recent series of rate cuts was at an end.

The bank has cut rates by 5.5 percentage points so far this year.

South Africa's main trade body Cosatu called for a change in policy.

"South Africa can no longer afford to pursue low inflation at the cost of our people's livelihoods," it said.

"This conservative stance will maintain the overvaluation of the rand and, with it, the slow growth of the economy and continued job losses.