In an attempt to offset the economic damage from the Covid-19, South Africa’s repo rate has been slashed by 100 basis points or 1% bringing the repo rate down to 4.25% on Tuesday morning.
The latest cuts means that the prime lending rate will now drop to 7.75 percent.
South Africa’s Reserve Bank (SARB) governor Lesetja Kganyago announced in March earlier this year, at the start of South Africa’s response to the pandemic that the Reserve Bank would cut interest rates by 100 basis points.
This took the repo rate to 5.25 percent which took effect from 20 March 2020, and saw the prime lending rate drop to 8.75 percent.
In January, the repo rate was lowered from 6.5% to 6.25% following a unanimous vote by the Reserve Bank’s monetary policy committee.
SA’s interest rates are now at their lowest in history, and come amid a wave of global central bank cutting in an attempt to offset the economic damage from the Covid-19 pandemic.
This follows an announcement by President Cyril Ramaphosa on Thursday that SA’s 21-day lockdown has been extended until the end of April.
It also comes as the Minister of Finance, Tito Mboweni, is set to address media about the recent rating downgrades by Moody’s and Fitch which are expected to have a severe impact on public finances.
The cut is clearly a response to the extension of the lockdown, and the depth of SA’s impending recession is likely worrying the central bank, said Capital Economics chief emerging-markets economist William Jackson in a note.
The decision by the Reserve Bank to cut the repo rate by a further 100 basis points is to be applauded and absolutely necessary for the economy and property market, says Samuel Seeff, chairman of the Seeff Property Group.
The rand weakened after the announcement, down 0.2% at R18.12/$ in morning trade.