Mixed reaction to Reserve Bank's 25 basis points interest rate cut

Some economists welcome the cut, others criticise its timidity in addressing issues

- YOGASHEN PILLAY

SOUTH Africa Reserve Bank (SARB) Governor Lesetja Kganyago announced a 25 basis point cut to the repo rate on Thursday - that was widely expected - bringing it down from 7.50% to 7.25% with some economists welcoming the cut and others criticising its timidity in addressing the nation’s pressing economic woes.

This decision, made by the Monetary Policy Committee (MPC) offers modest relief to borrowers in an economy grappling with sluggish growth and rising unemployment. The decision to cut rates was unanimous, with one MPC member voting a 0.5% cut.

Kganyago said they have now trimmed GDP projections and currently expect growth of 1.2% this year, rising to 1.8% by 2027. “The outlook for structural reforms remains positive, but there are also headwinds like lower global growth. Given the lower forecast, we assess the risks to growth as balanced. Inflation was below 3% again in April. Core inflation came in at 3%, at the bottom of our target range,” he said.

Reza Hendrickse, a portfolio manager at PPS Investments, said the market has been divided regarding a rate cut.