‘The widely expected decision by the Monetary Policy Committee today to reduce the repo rate by 25 basis points, although minimal, remains positive for the economy. Even a small cut in interest rates at this stage in the business cycle sends a helpful message that borrowing costs have been marginally eased to support the economy. Both domestic and global economic trends in recent months have pointed towards lower rates.

The psychological effect of the interest rate cut on consumer and business confidence will possibly be greater than its real effect on the economy. Other costs, such as electricity tariffs, are in any case rising faster than borrowing costs have fallen. With the SARB having now yet again reduced its 2019 growth forecast, this time from 1% to 0.6%, there needs to be a further robust debate on what is the future appropriate monetary policy response in these economic circumstances.

 

Full Statement Attached

 

Issued by The NWU Business School