ALISTER BULL, Johannesburg | Friday 2.00pm.
THE country’s four major banks, Nedcor, First National Bank, ABSA Bank and Stanbic said on Friday they would cut prime lending rates by one percentage point to 14,5%, with effect from January 19.
The cuts were in swift answer to calls from the Reserve Bank on Thursday for lower prime rates to foster growth.
South Africa is forecast to post 3,0-3,5% growth in gross domestic product (GDP) this year after narrowly escaping recession in a 1998 emerging market crisis. But even this growth will be unable to trim mountainous unemployment.
Johannesburg markets celebrated the news, with bank stocks up sharply, bonds hovering and the rand firm — evidence that investors were comfortable with the rate cut and reckon it will benefit the economy.
The banks have also trimmed their mortgage rates by one percentage, easing the cost to home owners who have struggled under the borrowing burden after interest rates were hiked skyward in the face of the 1998 market crisis.
The Reserve Bank’s Monetary Policy Committee said a decline in market rates justified a monetary easing, but stated firmly that, once this move has been completed, it will be sufficient until a clearer view on inflation had been gained.
Economists welcomed this caution but said it does not necessarily mean that the country had marked the bottom of the interest rate cycle. — Reuters