Reserve Bank cuts repo rate to 3.75%

Last month, the central bank cut the repo rate by 100 basis points.

FILE: South African Reserve Bank Governor Lesetja Kganyago. Picture: AFP

JOHANNESBURG - There is good news for those with bonds and car installments: the Reserve Bank has once again lowered the repo rate, this time by 50 basis points.

Governor Lesetja Kganyago announced that the rate was now 3.75%.

This is the latest in a series of cuts to stimulate the economy since the outbreak of the coronavirus, with cuts of a further 200 basis points over the past two months.

Kganyago is concerned about GDP, saying that the figure was worse than last reported.

"The bank currently expects GDP in 2020 to contract by 7% compared to the 6.1% contraction forecast in April."

But he said that inflation was in check and growth is expected to bounce back.

"GDP is expected to grow by 3.8% in 2021 and by 2.9% in 2022.

Kganyago said that low oil prices were set to contribute to lower inflation, which was good news for cash-strapped South Africans.

The central bank chief said that while South Africans were battling to pay their bills, fuel prices should remain low for the next few months.

"The spot price for Brent crude oil is currently around $34 a barrel and is expected to remain at these levels in the coming months, contributing to reduced petrol price inflation."

A further reduction in the repo rate is good news for those in debt but the opposite for those with investments.