(5 minutes read)
· The South African Reserve Bank’s Monetary Policy Committee (MPC), has decided to keep the rate unchanged at 3.5%
· The central bank governor, Lesetja Kganyago, said there will be no further repo rate cuts in the near term
· However, two rate increases in the third and fourth quarters of 2021 may take place
· Apex Bank Governor said that the steps they have taken to cut rates are yet to filter into the economy, thereby meaning that banks have to cut their lender rates in commensurate with the interest rate cuts
The South African Reserve Bank’s Monetary Policy Committee (MPC), has decided to keep the rate unchanged at 3.5%. The apex bank has cut the repo rate by 300 basis points since the beginning of the year.
The verdict to keep the repo rate unchanged was divided. While two members of the Monetary Policy committee voted for a further cut of 25 basis points, three other members opted for the rates to remain unchanged. The central bank ha d resorted to cut the repo rates to mitigate the impact of the Covid-19 pandemic on the economy.
The central bank governor, Lesetja Kganyago, said there will be no further repo rate cuts in the near term. However, two rate increases in the third and fourth quarters of 2021 may take place. Apex Bank Governor said that the steps they have taken to cut rates are yet to filter into the economy, thereby meaning that banks have to cut their lender rates in commensurate with the interest rate cuts.
The repo rate determines the interest rate at which the central bank lends money to commercial banks. The lower the rate, the lower the interest people pay their banks on loans. The governor said the economic effects caused by the Covid-19 pandemic will take years for the economy to recover. The economic contraction and slow recovery will keep inflation below the midpoint of the target range for this year.The bank’s inflation target has been between 3% and 6%.
The travel and tourism coach transport industry has been severely affected by the Covid-19 lockdown. The industry has a fleet of about 1 000 vehicles designed to meet standard- to mid- and upper-end luxury travel requirements. It makes an estimated R5-billion a year and employs about 5 000 people.
