Rate cut surprise

rph72

rph72

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http://www.fin24.com/articles/defau...icleId=1518-25_2547465&IsColumnistStory=False

Pretoria - The South African Reserve Bank's (Sarb's) monetary policy committee (MPC) on Thurday cut the key repo rate by 50 basis points, bringing it down to 7%, with the prime lending rate dropping to 10.5%.

The repo rate is the rate at which the central bank lends to other banks, while the prime lending rate is the benchmark rate at which banks lend to customers.

Although most economists were convinced that the best scenario for the MPC would have been to leave the repo rate unchanged, some said shocking retail and manufacturing data released earlier this week could have prompted the central bank to cut rates.

Earlier on Thursday, Econometrix chief economist Dr Azar Jammine said further rate cuts could be limited. This is because when adjusted for inflation, interest rates are already at the lowest point seen this decade.

- Fin24.com
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Hey! If you'd asked me which way this one would have gone ... my head would have said rates unchanged ... but my heart would have hoped for a cut. :)

Regardless this is good news for some.

For others like me who fixed their interest rate way back in 2007, we're looking forward to the end of the contract period and low interest rates! :D
 
What was it fixed at in 2007 ?
 
Interesting - good news :) I used to be in the camp wanting it to increase, now that I bought a house - I'm in the camp wanting it down.
 
im a bit surprised at the decision, I figured they would have waited just a little longer before implementing another cut, inflation is/was coming down nicely but still not there, although the lag effect will probably see inflation continue dropping. Well its good news for all you bond payers :D
 
So just for allowing you the privilege of borrowing money the banks already make 3,5% :/
 
MadMailMan said:
Ouch! What is the highest the prime rate has been since you fixed your rate?
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didn't it get up to the 15's at one stage? I was a happy man then ... oh well, its swings and roundabouts isn't it?
 
hoegh said:
im a bit surprised at the decision, I figured they would have waited just a little longer before implementing another cut, inflation is/was coming down nicely but still not there, although the lag effect will probably see inflation continue dropping. Well its good news for all you bond payers :D
Click to expand...

Agree. It is a well accepted fact that there is about a 12 to 18 month lag between an interest rate change and its affect on the economy. So this one is a wee bit of a surprise.

I would have expected this in September or October.
 
You guys are right about the inflation outlook looking better but that is obviously not the only factor considered when deciding on a rate cut. GDP is still contracting and factory and mine outputs continue to fall..... they need stimulating! Otherwise we may well end up with stagflation if these electricity cost increases and all these wage negotiations and strikes start having a negative effect on inflation.
 
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