The Reserve Bank’s Monetary Policy Committee has decided to cut the interest rate by 25 basis points to 3.5%. Some economists had expected the central bank to cut by as much as half a percentage point.
The Bank has cut rates aggressively in a bid to try and breathe some life into an economy on life support amid the coronavirus lockdown.
It has now slashed rates by a cumulative 3 percentage points this year alone and economists say the Reserve Bank has a scope to cut some more.
Kganyago says the bank is watching developments very closely.
“Emerging and developing economies are generally constrained by less policy space currency risks and tight global financial conditions. The COVID-19 outbreak has major health and social impact, presenting challenges in forecasting in domestic and global economies. Our second-quarter estimates for output has been revised lower. The bank currently expects GDP in 2020 to contract by 7.3% compared to 7% forecast in May. For the year as a whole exports and imports are expected to decline sharply, job losses are also expected to rise further.”
Kganyago says the easing of the lockdown has supported growth in the economy.
Reserve Bank press briefing: