Rate cut boost
Analysts have welcomed the 50 basis points cut by the South African Reserve Bank as a relief to debt-strapped consumers.
This cut takes the repo rate to six percent and prime rate from 10 to 9,5percent.
Making the announcement in Pretoria yesterday, governor Gill Marcus said the cut was backed by the growth in the economy.
"The economy is growing. This is the step to support the growth and ensure the recovery continues," Marcus said.
She said the monetary policy committee assessment of the improved inflation outlook created sufficient room for monetary policy to provide additional stimulus, to the "somewhat fragile recovery of the domestic economy".
Efficient Group economist Dawie Roodt said the rate cut could be the last one.
"At the moment it's unlikely the cut will have an immediate effect on inflation because it is not going to make everyone borrow money," he said.
"The cut will make a difference because of the previous cuts the Reserve Bank has allowed for about two years. This means people who borrow money will be in a better position," Roodt said.
Roodt said inflation was low at 3,7 percent until it starts to pick-up.
Kgotso Radira, economist at Investec, said: "The reasons for today's cut are the favourable inflation outlook - better than at the previous Monetary Policy Committee meeting due to a more rapid deceleration than was initially expected."
Luthando Vutula, managing director at Absa Home loans, said the cut in interest rates will provide further relief to many consumers struggling with debt.
"The lower mortgage rate will support the housing market and the affordability of housing against a background of property prices rising by more than 10 percent year-on-year, in the first eight months of the year," said Vutula.
