Marcus gives small, but most welcome, measure of relief
The Times Editorial: Reserve Bank governor Gill Marcus stunned most economists yesterday when she lowered the repo rate by 50 basis points to 5% - its lowest in 30 years.
The decision, motivated by concerns that the economy is slowing, and the need to shield South Africa from the effects of the eurozone crisis, is a welcome relief to debt-laden consumers and small business owners who, for years, have had to contend with sharp rises in the price of electricity, service charges, taxes and fuel costs.
Though modest, the cut - the latest installment in a cumulative 700 basis point rate reduction since December 2008 - will bring obvious benefits to homeowners who are servicing bonds.
The cumulative effects of the cuts might also help to reignite the property market, which has been in the doldrums since the global credit crunch that started in 2008.
Economists are now speculating that Marcus might reduce the repo rate even further when the monetary policy committee meets again in September.
Consumers who are paying off credit cards and personal loans also stand to benefit, however marginally, from the latest cut.
But for those who might be tempted to think that Christmas has come early, Marcus made it plain that her intention was not to get consumers to spend South Africa out of trouble but to help households reduce their debt.
Though the ratio of household debt to disposable income has fallen slightly over the past year, it sits at 75% - way too high.
Finance Minister Pravin Gordhan - and Trevor Manuel before him - repeatedly called on people to save more, and for good reason.
Through its prudent approach to monetary policy during one of the most economically trying periods in this country's modern history, the Reserve Bank is giving consumers an opportunity to cut back on their debt.