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REPO RATE CUT – FIRST TIME IN FOUR YEARS

 

On 19 September the South African Reserve Bank Governor, Lesetja Kganyago, announced that the Monetary Policy Committee has cut the repo rate – the rate that a central bank lends money to commercial banks – is now at 8%, and the prime rate at 11.5%, thus following in the footsteps of the US Federal Reserve and the Bank of England.

After a deliberation on whether to lower the repo rate by 25 basis points(bps) or 50 bps, it was decided to lower it with 25 bps. Kganyago called 25 bps a “prudent stance and less adventurous.”

There is an expectation for the central bank to lower the repo rate graduately in the future maybe another 25 bps in November at the last monetary policy meeting for 2024.

Due to lower fuel prices, no more power cuts by ESKOM and the “two-pot” pension reform plan, whereby partial withdrawals from retirement funds can be made before retiring, leaving a portion preserved for retirement, the economy is expected to strengthen.  

 

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