South African Reserve Bank

July 19, 2012

SARB officials surprised markets with their first repo rate change since November 2010, a reduction of 50 basis points to 5.0%.  This pre-emptive action came in response to mounting worries that weak European growth will weigh on the South African economy. A statement from the central bank concludes

In the light of these developments the MPC views the prevailing conditions to be appropriate for further monetary accommodation to the economy that will not undermine the inflation outlook. The MPC has therefore decided to reduce the repurchase rate by 50 basis points to 5,0 per cent from Friday 20 July 2012. While it is recognised that such a move on its own will not overcome the challenges facing the economy, it is felt that it can help alleviate some of the pressures faced by some sectors. A sustained increase in the potential output of the economy will require a concerted and coordinated effort from both government and the private sector.

The repo rate was cut earlier from 12% to 7% between December 2008 and August 2009 and by 50 bps in three moves during 2010.  The economy is growing somewhat less than 3.0%, while CPI inflation is slightly above 5.0%.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.


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