In a move designed to ease the economic impact of the Covid-19 outbreak, the South African Reserve Bank on Thursday announced that the repo rate would be cut by 100 basis points - with the new rate set at 5.25% per annum effective from today.
Following the Monetary Policy Committee (MPC) meeting this week, Reserve Bank governor Lesetja Kganyago announced that the central bank had decided to make one of the biggest rate reductions yet as the country tried to mitigate the economic impact of Covid-19.
“Current economic conditions underscore the importance of implementing prudent macroeconomic policies and structural reforms that lower costs generally, and increase investment opportunities, potential growth and job creation,” he said.
“The MPC has decided to cut the repo rate by 100 basis points. This takes the repo rate to 5.25% per annum, with effect from 20 March 2020.”
According to the Quarterly Projection Model, the implied path of policy rates indicates that the repo rate will be cut by 25 basis points on three separate occasions. Cuts will occur in the second and fourth quarter of 2020, as well as in the third quarter of 2021.
On the subject of inflation, Kganyago confirmed that the central bank had predicted core inflation to be moderate at 3.9% in 2020, with the overall risks to inflation balanced and under control at the moment.
“Barring severe and persistent currency and oil shocks, inflation is expected to be well contained, remaining below the midpoint of the target in 2020 and close to the midpoint in 2021,” he said.
He added that although monetary policy could not change the country’s fortunes on its own, it would help the consumer with short-term financial difficulties, particularly with the unexpected outbreak of the Covid-19 virus. – Bjorn Vorster
