The interest rate is now at its lowest level in nearly five decades.
This follows after the Reserve Bank on Thursday lowered the interest rate for the fifth time this year.
This time, the reduction was a quarter percentage point.
Three members of the Monetary Policy Committee (MPC) were in favor of a 25 basis point reduction while two wanted to leave the rate unchanged.
This brings the total reduction in the interest rate for 2020 to 3.25 percentage points. The repo rate will henceforth be 3.55% and the prime interest rate of banks 7%.
The lowest interest rate was still 3.15% in September 1973.
Lesetja Kganyago, president of the Reserve Bank, said in her online news conference that although it was found that there was “space” to lower the interest rate a further 25 basis points during the fourth quarter of the year, the decision was made to reduction now to be realized.
However, he says the MPC will monitor events to see what he will do in the future. The expectation is not to adjust interest rates in the first quarter of 2021.
The Reserve Bank’s expectation for economic growth is now -7.3 compared to -7% in May, the -6.1% forecast in April and just -0.2% forecast in mid-March. Due to the sharper contraction in 2020, stronger growth is forecast for the next two years. For 2021, growth of 3.8% is now forecast (April: 2.2%) and for 2020, 2.9% is forecast (April: 2.7%).
The central bank maintained its expectation of inflation at 3.4%.
However, this means higher inflation is forecast thereafter. For 2021, the expectation has been lowered to 4.3 (May: 4.4%). This is also the rate that the Reserve Bank expects in 2022.