AfricaEconomySouth Africa

Economic Downturn makes the Repo rate cut by SARB less impactful

By Sihle Nyangiwe

The South African Reserve Bank (SARB) Governor Lesetja Kganyago, announced the widely anticipated interest rate cut on the 23rd of July 2020. He cut the rate by 25 basis point, bringing the total cuts to 300 basis points thus far. He announced the decision after consulting with the Bank’s Monetary Fund Committee which he leads.

The slash will bring the Repo rate to 3,50% and the prime landing rate to an all time low of 7%. Kganyago was expected to make the call to help the crippling economy as it has since entered into a recession after a third consecutive GDP  contraction in the third quarter. Economics Professor of the University of Pretoria Steven Koch confirmed to Media Bypass that, “with the extent of [the] uncertainty about the economy, the lock down and how long before a vaccine, I suspect that for many 25 basis points will not do much.” Koch continued to provide that those battling debts and tight budgets will be offered somewhat of a relief as they will be able to pay back thier debts quicker. 

The move has been praised by economists including Nedbank economist Isaac Matshego while some continue to call for a more aggressive action by the SARB.

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