South Africa Reserve Bank Again Slashes Repo Rate

The implied path of policy rates over the forecast period generated by the Quarterly Projection Model indicates five repo rate cuts of 25 basis points extending into the first quarter of 2021.

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South African rand
South African rand. Inked Pixels / Shutterstock.com

The South African Reserve Bank has cut the repo rate by 100 basis points, or one percentage point to 4.25%.

“The committee notes that the more prolonged lockdown and slower recovery creates downside risk to inflation and allows further space for monetary policy to respond to the virus-induced demand shock to the economy. 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,” said Reserve Bank governor, Lesetja Kganyago.

“Against this backdrop, the MPC decided to cut the repo rate by 100 basis points.

“This takes the repo rate to 4.25% per annum, with effect from 15 April 2020. The decision
was unanimous.”

The announcement was the second major cut in less than a month after the central bank cut the rate by one percentage point in mid-March.

The repo rate is the benchmark interest rate at which the Reserve Bank lends money to other banks.

The implied path of policy rates over the forecast period generated by the Quarterly
Projection Model indicates five repo rate cuts of 25 basis points extending into the first
quarter of 2021, said Kganyago.

“Monetary policy can ease financial conditions and improve the resilience of households and firms to the economic implications of COVID-19. In addition to continued easing of interest rates, the Bank has taken steps to ensure adequate liquidity in money and government bond markets and to ease capital requirements to free capital for onlending by financial institutions. Each of these steps make more capital available to households and firms.”

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