Bank cuts repo rate by one percentage point: interest rates at all-time low
The Reserve Bank has cut interest rates by one percentage point for the second time in just less than a month, bringing the repo rate down to 4.25% on Tuesday morning.
The 100 basis point (bps) cut on Tuesday follows a 100bps cut on March 19. In January, the Bank cut interest rates by 25bps.
SA’s interest rates are now at their lowest in history, and come amid a wave of global central bank cutting in an attempt to offset the economic damage from the Covid-19 pandemic.
The move follows an announcement by President Cyril Ramaphosa on Thursday that SA’s 21-day lockdown has been extended until the end of April.
The cut is clearly a response to the extension of the lockdown, and the depth of SA’s impending recession is likely worrying the central bank, said Capital Economics chief emerging-markets economist William Jackson in a note.
“The government will undoubtedly have to do more to support households and companies facing a dramatic loss of income,” said Jackson. “But, with poor public finances likely to constrain the size of the response, monetary policy will have to do more of the heavy lifting.”
The rand weakened after the announcement, down 0.2% at R18.12/$ in morning trade. The R2030 government bond was stronger, with its yield falling 13bps to 10.78%. Bond yields move inversely to bond prices.