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Yet another interest rate cut by the Reserve Bank and what it means

21 May 2020 6:38 PM
Tags:
Interest rates
Reserve bank
repo rates
Lockdown
COVID19
COVID-19

The Reserve bank has cut interest rates by another 50 basis points.

South African Reserve Bank Governer, Lesetja Kganyago, has announced the bank's latest decision on interest rates for the country.

The Reserve Bank will be cutting interest rates by 50 basis points, taking the repo rate to 3.75% per annum.

Busiswe Radebe, Nedbank economist, said the bank actually expected a full one percentage point because of their inflation forecast.

We had thought of that one per cent mark because our inflation forecast is different from that of the Reserve Bank, much lower.

Busiswe Radebe - Nedbank economist

Where they see inflation this year averaging around I think three-point-something we saw ours averaging at about two-point-eight per cent.

Busiswe Radebe - Nedbank economist

If you look at the Reserve Bank's inflation forecast going forward you can also see in 2021 and 2022 they're actually going closer to that four-point-five percent - sort of the mid-point of the inflation target range.

Busiswe Radebe - Nedbank economist

But what about deflation, as suggested by some analysts?

And what's more concerning is the fact that the Reserve Bank's forecast on growth is deteriorating.

It is a worry. At the last meeting they thought that growth was going to shrink six-point-one per cent and they think now it's about seven per cent... It's the same as Nedbank - we also thought growth was going to contract at seven per cent.

Busiswe Radebe - Nedbank economist

We do not see us reaching a pre-crisis peak three years from now. We'll still be in this mess trying to undo it three years from now.

Busiswe Radebe - Nedbank economist

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This article first appeared on 702 : Yet another interest rate cut by the Reserve Bank and what it means


21 May 2020 6:38 PM
Tags:
Interest rates
Reserve bank
repo rates
Lockdown
COVID19
COVID-19

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