JOHANNESBURG, July 18 (Xinhua) -- The Reserve Bank's Monetary Policy Committee has announced that the repo rate will be slashed by 25 basis points to 6.5 percent as from Friday. This welcomed cut was the first by the bank in more than a year.
Announcing the decision on Thursday, Reserve Bank Governor Lesetja Kganyago said the overall risk to the inflation outlook are assessed to be largely balanced.
"Demands side pressures are subdued, wages and rental prices are expected to increase at a moderate rate and global inflation remains low," he said.
He said Consumer Price Inflation was expected to peak at 5.4 percent in the first quarter of next year and then to be at 4.5 percent in the last two quarters of 2021.
With the gross domestic product (GDP) dropping in the first quarter, Kganyago said the GDP was likely to show improvement in the second quarter of this year.
GDP contracted by 3.2 percent as a result of electricity outages and strikes that "fed into broader weaknesses in investment, household consumption and employment growth."
Reacting to announcement, Professor Jannie Rossouw, Head of School of Economic and Business Sciences at the University of the Witwatersrand, said he was expecting this cut.
"I'm not surprised by the decision, I expected a drop, the margin that has been announced. The reason is the inflation rate is very close to the mid-point of the inflation range," he told Xinhua.
The repo rate is the rate at which the central bank lends money to commercial banks. Rossouw said this drop would bring relief to indebted consumers.
