- South Africa Cuts Interest Rate to 5.25% as Coronavirus Worsen Recession
South Africa, the second-largest economy in Africa, on Thursday lowered the interest rate by the most in almost a decade to curb the effect of coronavirus on the economy already in recession.
The South African Reserve Bank lowered the repurchase rate from 6.25 percent to 5.25 percent, according to Governor Lesetja Kganyago. He said the decision to lower the rate was unanimous.
The Monetary Policy Committee now sees the economy contracting by 0.25 percent in 2020, down from 1.2 percent growth projected in January.
“Monetary policy can ease financial conditions and improve the resilience of households and firms to the short-term economic implications of Covid-19,” Kganyago said. “Our decision and its magnitude seeks to do this in the near term.”
South Africa’s inflation was projected to decline due to weak global oil prices despite rising over 4.5 per cent of the central bank’s target for the first time in 15 months last month.
The MPC predicted inflation from 4.7 percent to 3.8 percent this year, especially with low commodity prices.
“We are definitely not in an inflationary environment,” Maarten Ackerman, chief economist at Citadel Investment Services, said by phone. “We are probably heading toward deflation.”
