Get more Mail & Guardian
Subscribe or Login

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.

Vote for an informed choice

We’re dropping the paywall this week so that everyone can access all our stories for free, and get the information they need in the run up to the local government elections. For the latest updates and political analysis, sign up to our daily elections newsletter.

If our coverage helps inform your decision, cast your vote for an informed public and join our subscriber community. Right now, a full year’s access is just R510, half the usual cost. Subscribers get access to all our best journalism, subscriber-only newsletters, events and a weekly cryptic crossword.

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

Related stories


Already a subscriber? Sign in here


Latest stories

High court dismisses Zuma’s plea for state prosecutor Billy Downer’s...

Judge Piet Koen set 11 April 2022 as the date for the arms deal trial to commence but Zuma’s counsel signalled that they may seek leave to appeal and force an umpteenth delay

Drop in registered voters, but will turnout continue to rise?

Voter turnout for local government elections has steadily risen since 2000, but the uptick could be stalled by Covid-19, much like registration has been

Police identify 300 high risk areas during local government elections

Police minister Bheki Cele said they have identified the KZN, Gauteng, Eastern Cape and Western Cape provinces as high risk areas deploying a high contingent of police and SANDF

Sudanese stand ground against coup as condemnation pours in

On Monday soldiers detained Prime Minister Abdalla Hamdok, his ministers and civilian members of Sudan's ruling council, who have been heading a transition to full civilian rule

press releases

Loading latest Press Releases…