(2 minutes read)
· Interest rates may go further down this week to levels close
to those last seen in the 1970s as the Reserve Bank of South Africa
seeks to bolster the ailing economy
· South Africa has already joined the world’s leading central
banks in aggressively cutting interest rates. It has also increased
bond purchases in an attempt to shore up liquidity
Interest rates may go further down this week to levels close to those
last seen in the 1970s as the Reserve Bank of South Africa seeks to
bolster the ailing economy. With the expectation of a cut in the
borrowing costs of between 25-basis and 50 basis points following a
meeting of the bank’s monetary policy committee, industry feels that
the interest accommodation might drive many corporations to knock at
the doors of the banks and institutions.
South Africa has already joined the world’s leading central banks in
aggressively cutting interest rates. It has also increased bond
purchases in an attempt to shore up liquidity. The Lesetja
Kganyago-led bank had gone for massive cut interest rates by 225 basis
points so far this year.
A cut of 25 basis points, or 0.25% on last Thursday would take SA’s
repo rate to 4%. A further cut of 50 basis points would mean the rate
would rule at 3.75%. This would enable the banks to borrow money at a
lesser rate of interest from the Central Bank and disburse it to the
consumers at a lower rate. But the expectation is that SA’s interest
rate will move down to 3.14% – last seen in October 1973- as a
response to the oil crisis and slowing global growth at the time.
That would take a cut bigger than 100 basis points. Will that happen?
