Another Rate Cut to Ease the Economy
The announcement on 14 April by Lesetja Kganyago, Governor of the Reserve Bank, that a rate cut of 100 basis points (1%) will bring relief to ease the economy.
“This unexpected cut is a pleasant surprise, after the 1% cut last month, and is truly welcome,” said Sandy Walsh, MD Property.CoZa South Africa. “The pressure being felt across all sectors and households is intensifying and this cut will give comfort to many.”
The advent of the Coronavirus and the subsequent Lockdown has impacted the economy, commerce and industry and many are starting to feel the financial burden. Kganyago’s outlook is that the lockdown will impact the economy and markets well into this year, possibly longer, and that we should expect supply chain disruptions and a further contraction in the economy in 2020. He said that the global monetary policy should be accommodating in the near-future and that the low oil price, of around $30, will depress the global economy. There is speculation that the Rand will recover but it is still weak and above R18 to US1.
Effective from 15 April 2020, the repo rate will be 4.25%, having dropped by 2% in less than a month. Accordingly, the prime rate drops by 1% to 7.75%.
“It is heartening to see the support from Government with these recent cuts, having not had a repo rate cut since July 2019. This will help some homeowners to manage their debt burden and provide an opportunity for potential homeowners to benefit from the lowered interest rates’, says Walsh.