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SARB To Slash Rates Further?

The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) are to meet this week (though they already held their May meeting early, in theory). The hot topic of the day is whether to lower the Repo Rate further or not.

Factors To Consider

There are always many factors to consider when looking over the Repo Rate and if an adjustment should be made. Right now there are a number of factors that could drive a decision to lower the rate even further than it has been dropped thus far this year.

The Rand has now somewhat stabilised at its lower value verse the Dollar after something of a free fall as the pandemic and lockdown hit.

Oil prices are now incredibly low (which helps keep inflation down) but will slowly start to climb now that OPEC is talking to one another again.

The economy is set to contract drastically due to the lockdown and changes forced by the Covid-19 Pandemic which is here to stay for the foreseeable future.

SA looks to experience a decent harvest in farms across the country this year, which keeps food costs down.

On the other hand, there have recently already been 2 very recent cuts which have seen the Repo Rate cut to only 4.25 (a record low).

How Low Can You Go?

Experts are predicting a lowering of the rate once more though they differ on what that might look like. Some are saying 25 base points, others are saying a full 100 base points once again. Some say 50 base points now and another 25 base points in July. So, there is little consensus other than most expect a further cut.

Rate cuts help ease pressure on those making use of credit as the banks base their linked rates off the repo rate. As it goes down so do the amounts expected in debt repayments from consumers each month.

The announcement will be made later this week.