Lesetja Kganyago has announced that the MPC has decided to slash the repo rate by 100 basis points.The Monetary Policy Committee has slashed the repo rate by 100 basis points. This will give debt-laden consumers and companies a financial breathing space as the world economy faces uncertain times due to the deadly and highly infectious coronavirus epidemic.
The cutting of the repo rate, the rate in which the Reserve Bank lends to the commercial banks, has an impact on the prime lending rate, which is the rate, commercial banks lend to customers."The technical recession of the latter half of 2019 contributed to a lower economic growth forecast. In addition, Covid-19 and existing constraints such as loadshedding, imply significant downside risk to the forecast.
"Easy global financing conditions have previously supported the value of the local currency, but financial volatility and a sharp rise in perceived risk has caused the rand to depreciate by 17.2% against the USD since January," said Kganyago."We needed Kganyago to come out with a bazooka and mow down the rate by at least 200 basis points.
"The Reserve Bank is busy playing catch-up while many restaurants and taverns are going to close down and thousands of jobs are going to be affected," Gqubule said.
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