Economists forecast another repo rate cut
Economists predict that the South African Reserve Bank is likely to cut the repo rate further when its monetary policy committee concludes its meeting on Thursday.
In May, the central bank cut the repo rate by 50 basis points amid the worsening economic outlook.
The repo rate now sits at 3,75% and the prime lending rate at 7,25%.
Econometrix chief economist Azar Jammine believes more relief is in store for debt-laden consumers.
“I expect that the Reserve Bank will reduce the repo rate by 25 basis points.
“Theoretically the way the Reserve Bank operates, even the 25 basis point cut that I expect to be announced tomorrow would not normally have transpired. It’s just that there is an opportunity in the very short term, given the very sharp decline in inflation, for the Reserve Bank to provide some relief in the face of the devastation that has been brought on the economy,” Jammine explains.
He says the country’s economy is still hanging by the thread.
“We are still in a very dire situation but obviously conditions have improved with the lifting of the lockdown from level 5, to level 4 and then to level 3.
“We’re still looking at the levels of economic activity well below what they were last year.”
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Efficient Group economist Francois Stofberg agrees with the prediction of a repo rate cut.
“I think it’s more or less slit between either keeping the rates unchanged and decreasing them by about 0.25 per cent.
“It has to do with a couple of things and the important thing to remember is that the mandate of the Reserve Bank is to keep inflation under wrap in the medium term.”