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Economists predict further repo rate cuts

The Reserve Bank announced on Thursday that it had cut the repo rate by 50 basis points to 3.75% in order to promote growth.

South African Reserve Bank Governor Lesetja Kganyago. Picture: AFP

JOHANNESBURG - There is consensus that the Reserve Bank could still further cut the repo rate as the country battles negative growth due to COVID-19.

The Reserve Bank announced on Thursday that it had cut the repo rate by 50 basis points to 3.75% in order to promote growth.

This follows two earlier decreases amounting to 200 basis points.

Reserve Bank Governor Lesetja Kganyago said negative growth of 7% was expected this year.

However, Citibank South Africa economist Gina Schoeman said they expected a far worse figure.

“Our GDP forecast is worse than the Sarb’s. We’re expecting about a 10% contraction this year for the economy.”

She said more repo rate cuts were expected.

“We expect another rate cut of 50 points. That might be done all in one go or maybe split up into two cuts of 25 basis points each.”

FNB economist Siphamandla Mkhwanazi agreed.

“They still have a bit more room to cut. We think it might be another 50 basis points cut just by looking at what the numbers are telling us.”

Both agreed that more cuts were needed to stimulate growth.

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