Repo rate cut by 100 basis points

The South African Reserve Bank’s monetary policy committee has unanimously decided to cut the repo rate by 100 basis points.

This takes the rate to 5.25% per annum, from 6.25%.

Although the bank decided to cut the repo rate, Governor Lesetja Kganyago emphasised that monetary policy on its own cannot improve the potential growth rate of the economy or reduce fiscal risks.

Covid-19 is forecast to slash global growth. Since the virus has hit South Africa’s shores, markets have gyrated. The JSE plunged 12% this week, while the rand has also been weak, trading at levels of more than R17 to the US dollar.

Kganyago said that the general stance of the monetary policy committee has left them in a good position from which to cut the rates.

Other countries, where the interest rate is near zero, do not have this space, he said.

The governor said the committee believes the steps it has taken will have the desired effect on the economy and there is no need yet to use unconventional tools.

Kganyago said that the decrease will mitigate the risks that households and businesses are currently facing, as they would have more money to spend — or less money to pay back to banks.

But he added that monetary policy alone cannot alleviate the country’s economic woes and South Africa’s economic outlook remains “fragile”.

Kganyago says Covid-19 is likely to result in weaker demand for exports and domestic goods and services, but its effect on the economy could be partly offset by lower oil prices.

The governor forecast that headline consumer price inflation would average 3.8% for 2020, 4.6% for 2021 and 4.4% in 2022.

This leaves inflation within the 3% to 6% target range set by the bank.

The decrease is higher than the 50 basis points expected by trade unions and economists.

At its last meeting in January, the bank’s monetary policy committee unanimously decided to reduce the repo rate by 25 basis points, to 6.25%.

Since then, the country’s economy has plunged into a technical recession after it failed to grow for two consecutive quarters.

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever. But it comes at a cost. Advertisers are cancelling campaigns, and our live events have come to an abrupt halt. Our income has been slashed.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years. We’ve survived thanks to the support of our readers, we will need you to help us get through this.

To help us ensure another 35 future years of fiercely independent journalism, please subscribe.

Tshegofatso Mathe
Tshegofatso Mathe
Tshegofatso Mathe is a financial trainee journalist at the Mail & Guardian.

The recovered remain cautious

People who have survived Covid-19 are not going through life carefree. They are still taking all the preventative measures

Lockdown relief scheme payouts to employees tops R14-billion

Now employers and employees can apply to the Unemployment Insurance Fund for relief scheme payments

Press Releases

Covid-19 and Frontline Workers

Who is caring for the healthcare workers? 'Working together is how we are going to get through this. It’s not just a marathon, it’s a relay'.

PPS webinar Part 2: Small business, big risk

The risks that businesses face and how they can be dealt with are something all business owners should be well acquainted with

Call for applications for the position of GCRO executive director

The Gauteng City-Region Observatory is seeking to appoint a high-calibre researcher and manager to be the executive director and to lead it

DriveRisk stays safe with high-tech thermal camera solution

Itec Evolve installed the screening device within a few days to help the driver behaviour company become compliant with health and safety regulations

Senwes launches Agri Value Chain Food Umbrella

South African farmers can now help to feed the needy by donating part of their bumper maize crop to delivery number 418668

Ethics and internal financial controls add value to the public sector

National treasury is rolling out accounting technician training programmes to upskill those who work in its finance units in public sector accounting principles

Lessons from South Korea for Africa’s development

'Leaders can push people through, through their vision and inspiration, based on their exemplary actions'

Old Mutual announces digital AGM

An ambitious plan to create Africa’s biggest digital classroom is intended to address one of the continent’s biggest challenges — access to education

The best local and international journalism

handpicked and in your inbox every weekday