SA’s repo rate to remain at 3,5% – analysts

THE South African Reserve Bank is expected to keep the country’s benchmarking repo rate unchanged this week at 3,5%, and to only administer a cut where necessary in November, analysts and economists predict.

This, according to a Reuters poll, would still help cushion the deep pandemic-driven economic contraction before inflation resurfaces.

The reserve bank since the beginning of this year cut the rate by 300 basis points, leading to the current 3,5% and the prime rate 7%.

According to the poll taken last Friday, the majority of economists expect the repo rate to be kept at current levels, while some gambled with another 25 basis points cut to an all-time low of 3,25%.

The poll also found that if rates are left as is this week, there would be another cut in November for the last time in this cycle before the central bank starts raising rates again.

Citi’s Luis Costa was quoted by Reuters as saying the South African Reserve Bank still has room for another rate cut of 25 basis points, but this would depend on data.

Costa, however, also cautioned that space for further cuts is slowly narrowing due to the structure of government spending.

South Africa’s economy recorded a whopping 51% reduction in economic activities during the second quarter of this year, and expectations are that an 8,5% contraction would be registered for the full calendar year of 2020.

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