[Audio] SARB lowers interest rates by 1%*

The SARB has announced a 100-basis point reduction in the repo rate, to 5.25%. The Prime lending rate now falls to 8.75%.
[Audio] SARB lowers interest rates by 1%*

This is an effort to lower the cost of borrowing and stimulate the economy in the face of the Covid-19 shock.

Two key points to consider:

  1. The cut lowers the interest rate differential between South Africa and the rest of the world and may therefore contribute to potential long term ZAR weakening.
  2. The cut in and of itself is insufficient to shore up the country’s economy, even before the onset of Covid-19. It reveals that policy makers are relatively impotent in responding to external shocks.

The SARB's aggressive actions mirror those of other central banks worldwide, including the US Fed, the ECB and the Bank of England.

However, monetary loosening is unlikely to ameliorate the fallout of the Covid-19 crisis in South Africa.

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