South Africa: SARB Cuts Repo By 25 Basis Points While Repeating Pleas for Structural Reform

analysis

The South African Reserve Bank stuck to the script on Thursday, July 18 when its Monetary Policy Committee cut the key lending, or repo rate, by 25 basis points. The tone of the announcement was on the hawkish side and the bank must be tiring of its plea for wider structural reforms to complement monetary policy in order to get economic growth fired up.

Once in a blue moon, the SA Reserve Bank (SARB) will take markets by surprise with a cut when one was not expected or with a bigger cut than economists anticipated. There were no shades of lunar blue when Governor Lesetja Kganyago announced the outcome of the Monetary Policy Committee's (MPC) three-day meeting, which takes place once every two months. A cool customer, he was as predictable as the moon's phases.

The consensus among economists was for a 25 basis points (bp) reduction, and that's what the SARB delivered. And the tone of the statement suggested that monetary policy is not going to significantly loosen any time soon.

"Ultimately, the SARB delivered on market expectations while at the same time sending a message that some caution is still warranted," Jana van Deventer, an economist with financial...

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