SAns could see financial relief after SARB announces first interest rate cut in 4 years

JOHANNESBURG - South Africans could see financial relief after the South Africa Reserve Bank (SARB) announced its first interest rate cut in four years.

This comes after significant pressure on consumers, with borrowing costs surging by 475 basis points since 2021. 

The reserve bank cut the repo rate by 25 basis points, bringing it down from a 15-year high of 8.25% to 8%. This marks the first rate cut in four years.

Key factors behind the decision include a stronger rand, easing global inflation, and the United States (US) Federal Reserve’s recent 50% rate cut. 

Inflation in South Africa has also dropped to 4.4% in August, down from 4.6% in July, fuelling hopes for further cuts.

The repo rate reduction is expected to lower borrowing costs for consumers and businesses, potentially stimulating spending, and investment. 

ANOTHER INTEREST RATE CUT ON THE CARDS

An economic analyst predicts another interest rate cut in November, as South Africans continue to navigate a challenging economy.

While the cut is deemed modest, it's seen as a positive step forward.

SARB Governor Lesetja Kganyago attributed the cut to lower oil prices and a strengthening rand as factors that allowed for the easing of the policy rate.

For consumers and businesses, the repo rate cut means a potential decrease in borrowing costs, with lower interest rates on loans and mortgages expected to follow.

North West Business School Professor Raymond Pearsons said the situation for consumers could improve.

“Well, as things are at the moment, both globally and in South Africa, we ought to be looking forward to a further interest rate cut when the Monetary Policy Committee meets again in November, perhaps by another 25 or even 50 basis points, depending on how the situation unfolds between now and then.”