South Africa: SARB Surprises With a Rate Cut to Kick Off 2020 and Slashes Growth Forecasts

analysis

The good news is that the South African Reserve Bank surprised us with a 25 basis point cut to its key repo rate. The bad news is that it has cut its 2019 growth forecast to an anaemic 0.4% and even that may prove optimistic.

With subdued inflation, almost no economic growth and eye-watering levels of unemployment, it should have come as no surprise that the SARB's Monetary Policy Committee (MPC) voted unanimously at the conclusion of its first meeting of 2020 to cut its key repo rate by 25 basis points to 6.25%.

Yet the consensus among economists was that the SARB would keep the rate unchanged, in part to help shore up the rand. But the currency has gained 2.6% against the US dollar since the last MPC in November 2019, so even that argument was starting to look a bit thin.

Inflation, and the expectations around it, was a key reason for the cut. It has continued to surprise on the downside, even though it is a trend one would generally expect when the economy is so weak and unemployment is so high. If inflation does take off against this backdrop, then South Africa will be stuck...

See What Everyone is Watching

More From: Daily Maverick

Don't Miss

AllAfrica publishes around 800 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.