SARB expects more rate cuts to follow
The South African Reserve Bank (SARB) has cut the repurchase (repo) rate by 50 basis points (0.5%) at the conclusion of the Monetary Policy Committee meeting on Thursday.
The South African Reserve Bank (SARB) has cut the repurchase (repo) rate by 50 basis points (0.5%) at the conclusion of the Monetary Policy Committee meeting on Thursday. This brings the repo rate to 3.75% and the prime lending rate to 7.25%. Lending rates in South Africa have now been reduced by 2.75% in 2020. The Reserve Bank has implied that rates could continue to be lowered over the next two quarters by 0.25% and 0.25% respectively. The bank has noted that global ‘economic and financial conditions are expected to remain volatile for the foreseeable future. In this highly uncertain environment, future decisions will continue to be data dependent and sensitive to the balance of risks to the outlook’.
Gross Domestic Product (GDP) is forecast by the SARB at -7% in 2020. This figure is downward revision from the previous MPC meetings estimate (April) of -6.1%. GDP is expected to grow by 3.8% in 2021 and by 2.9% in 2022.
The Bank’s headline consumer price inflation forecast averages 3.4% for 2020 and 4.4% in 2021 and 2022. The forecast for core inflation is lower at 3.5% in 2020, 3.8% in 2021, and 4.1% in 2022.
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