Interest Rate Cut

[WilD_CaT]

We still have an incredibly high interest rate. Don't forget that places like the states have Prime at something like 0.5%

I cannot see that a half percent cut is going to lead to any spending splurge.

As someone else said, at best it could attempt to cushion the double whammy from petrol and Eskom in April

lol... Eskom and Petrol lead to increasing costs and rising prices for the consumer.

New money (I.E Credit) leads to the increasing money supply and more inflation...I.E more prices rising.

So if prices are continually rising, how does this cushion the blow?

Debt = more risk...it doesn't make us better off, we still have to pay it back as well as somehow afford all the rising costs.

 

[WilD_CaT]

Only not so good news if you are invested in cash investments.... it is good news for those invested in equities or property portfolios.

Yep, unless it leads to a bubble which it won't (Thank god) as it is not enough of a decrease.

The reason why investments rise is that debt is cheaper, thus leveraging is better, which = a bigger return which means the investments are more valuable and the price of those investments (Share price) will rise.

It is also due to more people can take out debt (as it is cheaper) to earn a return on the market, which results in greater demand for shares which = rising share prices.

The problem is real capital accumulation and investment happens because of savings.

Lowering the interest discourages savings....