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Kganyago announces repo rate cut to 5.25%

The repo rate is the rate at which the central bank lends money to commercial banks.

South African Reserve Bank Governor Lesetja Kganyago. Picture: @SAReserveBank/Twitter

JOHANNESBURG - South African Reserve Bank (Sarb) Governor Lesetja Kganyago on Thursday announced that the repo rate will be reduced by 100 basis points to 5.25%.

The repo rate is the rate at which the central bank lends money to commercial banks.

The decision follows this week's Monetary Policy Committee meeting.

Kganyago cited a fragile domestic economic outlook, with the economy expected to contract this year and therefore it needed a boost.

"The MPC decided to cut the repo rate by 100 basis points. This takes the repo rate to 5.25% per annum with effect from 20 March 2020. The decision was unanimous."

He said inflation was under control and no surprises were expected.

"Barring severe and persistent currency and oil shocks, inflation is expected to be well contained, remaining below the mid-point of the target in 2020 and close to the mid-point in 2021."

The cut is the second this year after January's 25 basis point reduction to 6.25%. In July last year, the bank reduced the repo rate by 25 basis points to 6.5% and it was kept unchanged in September and November.

The prime lending rate, the figure charged by banks to customers, has been cut to 8.75%.

WATCH: Kganyago announces repo rate decision amid coronavirus crisis