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NEWS JUST IN: SA Reserve Bank slashes interest rates by 50 basis points

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The prime lending rate will now drop to 7.25%.

JOHANNESBURG – South African Reserve Bank (Sarb) Governer, Lesetja Kganyago, today announced the bank’s latest decision on interest rates for the country. 

The decision follows the three-day meeting of the Sarb’s Monetary Policy Committee (MPC) which Kganyago chairs.

Kganyago announced that the Reserve Bank will be cutting interest rates by 50 basis points, taking the repo rate to 3.75% per annum. 

The prime lending rate will now drop to 7.25%. 

At the last emergency MPC announcement in April, Sarb cut interest rates by 100 basis points, to help the country’s economy that was taking a hit  from the Covid-19 pandemic.  

In April, Kganyago announced that the MPC decided that Sarb would be cutting interest rates by 100 basis points, which saw the repo rate drop to 4.25 percent per annum.

The Covid-19 outbreak has major health, social and economic impacts, presenting challenges in forecasting domestic economic activity#MPCStatement#MayMPCpic.twitter.com/ErHeAX6xkz

— SA Reserve Bank (@SAReserveBank)May 21, 2020

Many economists expected the central bank to cut interest rates by 50 basis points. 

Bianca Botes, Executive Director at Peregrine Treasury Solutions, said, “All eyes will be on Sarb this afternoon, with a minimum of 50 basis points interest rate cut expected, in an effort to assist the local economy. Deeper than expected cuts by Sarb could cap the rand gains.”

Dr Chris Harmse an economist and chief investment officer at Rebalance Fund Managers, said, “Although many expect the Reserve Bank to be heavily involved with a stimulation of the economy to prevent a disaster of a devastating recession, poverty and unemployment, the MPC still have to be very cautious. Lowering the repo rate by too much too soon may put the Rand exchange rate under pressure and causes large capital outflows.”

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