Reserve Bank cuts repo rate by another 50 basis points

A 7% fall in GDP is forecast this year, but a recovery is forecast for next year.

South African Reserve Bank Governor Lesetja Kganyago. Picture: Thobile Mathonsi / African News Agency (ANA)

SA Reserve Bank (Sarb) governor Lesetja Kganyago this afternoon announced a further rate cut, this time by 50 basis points or half a percent.

This is the fourth rate cut this year, prompted by the Covid-19 crisis and its economic effects.

The Sarb cut its key lending, or repo rate, by 25 basis points in January 2020. In March, it took off another 100 basis points as the pandemic began and then in April it cut another 100 basis points, taking it to a record low of 4.25%.

This 50 basis point cut takes the rate to a further historic low of 3.75%.

Kganyago said he expected a 7% contraction in GDP this year, compared to the -6.1% forecast in April.

But he forecast GDP growth of 3.8% in 2021.

The easing of the lockdown will support growth in the near term and some high frequency activity indicators show a pickup in spending from extremely low levels. GDP is expected to grow by 3.8% in 2021 and by 2.9% in 2022. #MPCStatement #MayMPC pic.twitter.com/6rtJ2qdntN

— SA Reserve Bank (@SAReserveBank) May 21, 2020