The majority of economists in a SABC News Survey expect the Reserve Bank to cut the repo rate this week. Nine out of 11 economists surveyed expect the Reserve Bank to cut the repo rate by between 25 basis points and 100 basis points.
Video below details the survey done by SABC News:
The Reserve Bank has so far this year cut the repo rate by 225 basis points, putting money in the hands of distressed businesses and households.
The Reserve Bank expects inflation to remain within the target bracket for some time to come, averaging 3.6% in 2020 and increasing to 4.5% in 2021.
The economy has taken a knock on the back of lockdown regulations put in place to curb the spread of the coronavirus. Most economists believe a cut would help stimulate the economy and boost consumer confidence. It is expected that the Reserve Bank will revise downwards its economic growth forecast.
Most views shared by economists are that inflation will fall below the lower end of the Reserve Bank’s target range in the coming months. This as a result of low demand conditions due to suppressing effects of the coronavirus and the lower petrol price following the collapse in the price of oil.
Some say the Central Bank will likely cut the repo rate as it is primarily focused on providing as much support to the economy as it can – given the unprecedented economic damage that COVID-19 pandemic and the lockdown are having in South Africa.
Others believe a smaller 25bp rate cut would be ideal, as the Reserve Bank would likely need to preserve some room to implement further easing later in the year, should conditions worsen further. Some say the earlier 225 basis points cuts are yet to filter through the economy and therefore it would be premature for another rate cut, before an assessment of the impact of the previous rate cuts.
The Reserve Bank’s Monetary Policy Committee is expected to announce its decision on Thursday.