Economists say the Reserve Bank’s Monetary Policy Committee’s (MPC) decision to cut the repo rate by 25 basis points will only bring slight relief to indebted consumers.
Reserve Bank Governor Lesetja Kganyago cited muted upside risks to the bank’s inflation outlook as the reason for the cut.
The cut is in line with market expectations.
The bank has further lowered its growth forecast.
Governor @KganyagoLesetja speaks about the @SAReserveBank’s forecast for headline consumer price inflation. #SARBMPCJUL20 pic.twitter.com/nzQJMA4P15
— SA Reserve Bank (@SAReserveBank) July 23, 2020
It now expects Gross Domestic Product (GDP) to contract by 7.3% from the 7% previously projected.
Local food price inflation is also expected to stay contained.
In addition to continued easing of interest rates, the SARB has relaxed regulatory requirements on banks and has taken important steps to ensure adequate liquidity in domestic markets. #SARBMPCJUL20 pic.twitter.com/JHZBAvqKma
— SA Reserve Bank (@SAReserveBank) July 23, 2020
Nedbank’s economist Isaac Matshego says, “It’s not a good news for consumers with debt, the cut will go some way in helping to reduce the debt burden but it will not be much, what’s worrying is the loss of income due to high job losses.”
In the video below, SARB governor, Lesetja Kganyago announce that the repo rates has been cut by 25 basis points:
Before the announcement, economists were divided over the possible cuts.
Some said the Monetary Policy Committee was likely cut the repo rate on the back of materialising downside risks to both its inflation and growth forecasts, while others suggested that rates may remain unchanged as the bank is assessing the impact of the earlier rate cuts.
In April, the MPC cut the repo rate by 100 basis points and cut the repo rate by 50 basis points in May.
