The South African Reserve Bank cut its benchmark interest rate by the biggest margin in more than 10 years as it seeks to support an already fragile economy that’s expected be hit hard by the novel coronavirus.
The monetary policy committee voted to lower the repurchase rate to 5.25% from 6.25%, governor Lesetja Kganyago said on Thursday in Pretoria. The decision by the five MPC members was unanimous. That’s more than any of the 21 economists surveyed by Bloomberg projected.
The rate cut may be the last. The central bank’s quarterly projection model indicated three repo rate cuts of 25 basis points each in the second and fourth quarter of 2020, as well as in the third quarter of 2021.
While the decision will provide some relief for businesses and consumers facing virus-driven disruptions, the Reserve Bank has said that monetary policy alone can’t lift economic growth. The MPC now projects the economy to contract by 0.2% this year compared to a forecast of 1.2% growth given in January.
Inflation rose above the 4.5% midpoint of the central bank’s target range for the first time in 15 months in February, but it’s expected to moderate over the coming months on the back of a sharp decline in oil prices. The central bank revised its price-growth forecast for the year to 3.8% from 4.7%. — Reported by Prinesha Naidoo, with assistance from Gordon Bell, Hilton Shone and Simbarashe Gumbo, (c) 2020 Bloomberg LP