The South African Reserve Bank has announced yet another cut in their repo rate by 25 basis point.
The repo rate is the rate at which a reserve bank lends money to the commercial Bank.
The South African rate has now been cut by 300 basis points in 2020 in an effort to mitigate the economic impact of Covid-19.
It is unclear at this point whether the Namibian reserve bank will effect any change in the repo rate here in Namibia, in line with this development in South Africa.
The previous South African repo rate cut was by 50 basis point and the Namibian reserve bank’s response to this was a cut by 25 basis points.
South African Reserve Bank (Sarb) governor, Lesetja Kganyago, announced another 25-basis points repo rate cut on Thursday, taking the rate to a four-decade record low of 3.5% and the prime commercial lending rate to 7%.
The widely expected decision was made following the bank’s 3-day Monetary Policy Committee (MPC) meeting in Pretoria.
In April, amid the initial Covid-19 “hard lockdown” to curb the pandemic, Sarb called an emergency MPC meeting and slashed the repo rate by 100 basis points. At its last meeting in May, it cut the rate by a further 50 basis points.
“The Covid-19 outbreak has major health, social and economic impacts, presenting challenges in forecasting domestic and global economic activity. The compilation of accurate economic statistics will also remain severely challenged,” Kganyago said in his MPC address.
“Even as the lockdown is relaxed in the coming months, for the year as a whole, investment, exports and imports are expected to decline sharply. Job losses are also expected to rise further,” added Kganyago.
The governor noted that the easing of the lockdown “has supported growth in recent weeks” with activity indicators showing a pickup in spending from extremely low levels.
“However, getting back to pre-pandemic activity levels will take time. GDP is expected to grow by 3.7% in 2021 and by 2.8% in 2022,” he said.
So what exactly does this mean?
The latest 25 basis points rate cut will see homeowners with an R1 million existing 20-year home loan, reduce their bond payment by around R150 a month. This is based on a prime lending rate. – additional reporting by Eagle FM reporters