Reserve Bank Governor Tito Mboweni and his Monetary Policy Committee decided to cut the repo rate by another 50 basis point yesterday, bringing it down to a low 7% – and the prime rate down to 10.5%. It was certainly a surprise to most, as the previous cut in May was said to be the last for some time. But after recent bleak data pointed to a longer and deeper recession than previously thought, Tito decided to cut again.

“There are encouraging signs that the global slowdown may have reached its lower turning point, although the speed and extent of the recovery are still subject to a high degree of uncertainty,” Mboweni told the Mail & Guardian.

According to Carmen Altenkirch, senior economist at Nedbank, “the recent weakness in economic data, combined with poor prospects for economic growth, were the main reasons behind the Reserve Bank’s decision to provide the economy with further interest-rate relief. This is certainly good news, but does highlight how very weak the local economy is. We still expect a further cut this year, possibly in September or October. Economic data will still look fairly poor then, and the inflation outlook would have improved as well.”

In his final announcement as governor, perhaps Tito felt he had to bring positive news? Gill Marcus takes over on the 9th of November this year. It will certainly be exciting to see how she will handle the ongoing recession. In the meantime, bond holders can breathe a sigh of relief and know they will be saving  a couple of hundred rands a month – for a while, at least. But don’t get overexcited and spend your extra money. Keep reading our Recession 101 Tips and save where you can, while you can.

Reference: Mail & Guardian


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