Repo Rate Changes

Sumen

Sumen

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SA Reserve Bank governor Lesetja Kganyago announced on Thursday that the Monetary Policy Committee has decided to cut the interest rates.

The latest move was largely in line with expectations.

This means the repo rate, which is the interest rate at which the SARB lends money to commercial banks, is now 6.75%. The cost of borrowing is 10.25%.

Interest rates have remained unchanged for 15 consecutive months.

"The domestic growth outlook remains a concern", said Kganyago.

The SARB also revised down economic growth for the country from 1% - 0.5% for this year.

Earlier on Thursday the European Central Bank also left interest rates unchanged. The rand was trading sideways at R12.97 to the US dollar.

Kganyago said the rand remains vulnerable to global monetary policy developments and credit ratings downgrades.

In South Africa a change in the interest rate is often made to keep inflation within the target band of 3% and 6%.

Inflation decreased for the third month in a row in June, according to data from Statistics SA. The annual consumer price index (CPI) eased to 5.1% after a drop to 5.4% in May.

The lower inflation and recessionary conditions are expected to prompt monetary policy easing, according to analysts. However, they added that this is counteracted by the persistent currency risk linked to political uncertainty and the normalising of interest rates by the Federal Reserve Bank in the US.

Kganyago said at the last announcement that a reduction in rates would be possible should inflation continue to surprise on the downside and the forecast over the policy horizon be sustainably within the target range.

Tough times

This month's SARB MPC announcement followed a tough month fighting off attacks on its mandate.

Public Protector Busisiwe Mkhwebane ordered Parliament to amend the Constitution to change the SARB’s mandate of inflation targeting to one that is more pro-growth.

Parliament wants Mkhwebane’s remedial action set aside.

The SARB is also challenging the remedial action, however the Office of the Public Protector indicated that it will not oppose the court application relating to the Reserve Bank's mandate.

Source:http://www.fin24.com/economy/surprise-cut-in-rates-20170720?mobile=true
 
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First line of copypasta is incorrect.
 
Sumen said:
a reduction in rates would be possible should inflation continue to surprise on the downside
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That's because the figures are bull, you bet it surprised on the downside, it surprised every breathing citizen with a budget that keeps shrinking month on month due to inflation. No way in hell inflation has come down in the real world.

They must be measuring f-ing "I'm a barbie girl" single albums and PokemonGO collectibles, those are surely cheaper these days. Petrol? Bread? Milk? not-a-hell!
 
I hold more savings than debt so unsure of this move, but it shouldn't impact me really.
 
Mike Hoxbig said:
It's covered, you can read the methodology here - http://www.statssa.gov.za/cpi/documents/The_South_African_CPI_sources_and_methods_26Feb13.pdf
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I know, I just disagree, strongly. For one the weights they apply are seemingly random and somewhat illogical: if petrol goes up 30% there's no point in pretending it will still just be the same proportion of my monthly budget as the previous month, I can't use less of it just because it is now more expensive, most of us need transport to get to work and there is a minimum amount of petrol you MUST buy either directly or indirectly. Any expense you MUST incur will take up a bigger proportion of your budget as the price goes up i.e. the weighting goes up automatically in the real world but not in "statistician la la land".

Then there's the non-descript vague products: beef mince just means whatever the cheapest dreck is they can find will be measured. Some producer mixes 50% horse into their beef mince which is already fatty as hell? No worries, beef mince has not gone up by much, extra lean pure beef mince however ..........

The whole thing is entirely out of touch with reality, and cynically I think it is intentionally out of touch when it helps them placate the masses with an interest rate cut despite prices being out of control.
 
Garson007 said:
I hold more savings than debt so unsure of this move, but it shouldn't impact me really.
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Well your method of doing things is wrong. You need to spend more, even make more debt to simulate the economy. Saving is an evil practice of hoarding wealth.

What we actually needed was a 2 or 3% increase. The economy wants to contract because prices are unreasonably high. Fueling the economy with cheap money like a rate cut only helps to keep prices high and boost more inflation when we need deflation and better spending power.
 
rietrot said:
Well your method of doing things is wrong. You need to spend more, even make more debt to simulate the economy. Saving is an evil practice of hoarding wealth.

What we actually needed was a 2 or 3% increase. The economy wants to contract because prices are unreasonably high. Fueling the economy with cheap money like a rate cut only helps to keep prices high and boost more inflation when we need deflation and better spending power.
Click to expand...

So basically you can't have the best of both worlds?
 
rietrot said:
Well your method of doing things is wrong. You need to spend more, even make more debt to simulate the economy. Saving is an evil practice of hoarding wealth.

What we actually needed was a 2 or 3% increase. The economy wants to contract because prices are unreasonably high. Fueling the economy with cheap money like a rate cut only helps to keep prices high and boost more inflation when we need deflation and better spending power.
Click to expand...

We will never have deflation. Deflation is something economies avoid - this is the reason even developed economies like the United States target an inflation percentage of about 2%. They do not want inflation to ever drop below 0 - it could be disastrous.

Lower repo rates makes all kinds of debt more affordable which stimulates the economy. People will be more likely to buy cars and houses because the monthly costs just got lower.
 
Ancalagon said:
We will never have deflation. Deflation is something economies avoid - this is the reason even developed economies like the United States target an inflation percentage of about 2%. They do not want inflation to ever drop below 0 - it could be disastrous.

Lower repo rates makes all kinds of debt more affordable which stimulates the economy. People will be more likely to buy cars and houses because the monthly costs just got lower.
Click to expand...

It is going to be disastrous, you are correct about that. We are currently in a period of decline(recession). Prices are only kept up by high input cost and loads of debt. If you don't allow price deflation, you are guaranteed long stagnant periods and big crashes were prices correct themselves.
 
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