An announcement by the Reserve Bank last week of an interest rate cut has been met with some cheer despite rumblings in other quarters.
The cut will provide hard-pressed consumers who are swimming in debt with necessary relief after a 25-basis point decrease in the repo rate. The decrease was hardly surprising as inflation had been on a decline for consecutive months. We welcome this good news for many who have been struggling to service their debts due to high interest rates and tough economic conditions that have eroded consumer’s disposable income.
The good news is not just for the individual consumers but also for our economy which will be strengthened and potentially stimulated for growth. According to economists, the drop in interest rates can also boost economic growth which will benefit everyone.
But we must remain cautiously optimistic about economic prospects going into the end of the year when consumer spending usually is high, which can lead to inflation rising again.
Many South Africans rely on credit to make ends meet and others often turn to loan sharks who charge exorbitant interest on the repayment of the money borrowed. This further adds to the debt burden and its implications are far and wide for individuals and the economy. Reduction in borrowing costs can lead to a few positive spin-offs including increased investment in the property market.
According to the FinScope Consumer SA survey, many South Africans borrowed money to buy food indicating food insecurity. Furthermore, the National Credit Regulator’s Credit Bureau Monitor for March last year showed that 23% of consumers missed instalment payments due to the vulnerable financial position they found themselves in.
Such has been the tough economic conditions faced over many months that even though the rate cut may appear little it provides much-needed relief. What makes this interest rate cut also significant is that it is the first since Covid-19 hit which should give us signs of hope and recovery of our economy.
With a struggling economy and increasing unemployment, particularly among the youth, things were starting to get worrying with our economic outlook. We must therefore celebrate this rate cut and hope for more in the future to ease the pain of many consumers.
SOWETAN SAYS | Interest rate cut inspires some hope
Image: Freddy Mavunda
An announcement by the Reserve Bank last week of an interest rate cut has been met with some cheer despite rumblings in other quarters.
The cut will provide hard-pressed consumers who are swimming in debt with necessary relief after a 25-basis point decrease in the repo rate. The decrease was hardly surprising as inflation had been on a decline for consecutive months. We welcome this good news for many who have been struggling to service their debts due to high interest rates and tough economic conditions that have eroded consumer’s disposable income.
The good news is not just for the individual consumers but also for our economy which will be strengthened and potentially stimulated for growth. According to economists, the drop in interest rates can also boost economic growth which will benefit everyone.
But we must remain cautiously optimistic about economic prospects going into the end of the year when consumer spending usually is high, which can lead to inflation rising again.
Many South Africans rely on credit to make ends meet and others often turn to loan sharks who charge exorbitant interest on the repayment of the money borrowed. This further adds to the debt burden and its implications are far and wide for individuals and the economy. Reduction in borrowing costs can lead to a few positive spin-offs including increased investment in the property market.
According to the FinScope Consumer SA survey, many South Africans borrowed money to buy food indicating food insecurity. Furthermore, the National Credit Regulator’s Credit Bureau Monitor for March last year showed that 23% of consumers missed instalment payments due to the vulnerable financial position they found themselves in.
Such has been the tough economic conditions faced over many months that even though the rate cut may appear little it provides much-needed relief. What makes this interest rate cut also significant is that it is the first since Covid-19 hit which should give us signs of hope and recovery of our economy.
With a struggling economy and increasing unemployment, particularly among the youth, things were starting to get worrying with our economic outlook. We must therefore celebrate this rate cut and hope for more in the future to ease the pain of many consumers.
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