'Reserve Bank's 25 bp interest rate cut opens up idea of 50 bp next'
Reserve Bank Governor Lesetja Kganyago announced the Monetary Policy Committee's decision to cut the repo rate by 25 basis points on Thursday. Stephen Grootes gets comment from Standard Bank's Goolam Ballim.
FILE: Screengrab of Governor Lesetja Kganyago delivering the MPC statement on 19 September 2024 from SABC feed on YouTube
Stephen Grootes discusses the MPC statement with Goolam Ballim, chief economist at Standard Bank.
The SA Reserve Bank (SARB) has announced a 25 basis point cut in the interest rate.
The decision by the Monetary Policy Committee (MPC) follows Stats SA's release of the latest inflation figures which show that consumer price inflation slowed for a third consecutive month in August.
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Delivering the MPC statement, Governor Lesetja Kganyago said the repo rate would drop to 8%, from 8.25%.
This means the prime lending rate is now 11.50%.
The decision by the Monetary Policy Committee was unanimous.
"They agreed that a less restrictive stance was consistent with sustainably lower inflation over the medium term."
"The forecast sees rates moving towards neutral next year, stabilising slightly above 7%... Decisions of the MPC will continue to be data dependent, and sensitive to the balance of risks to the outlook."
Lesetja Kganyago, Governor - SA Reserve Bank
MPC rates decision, 19 September 2024
Stephen Grootes interviews Standard Bank chief economist Goolam Ballim and asks if there was any space for the Reserve Bank to follow the lead of the US Federal Reserve with a 50 basis point cut.
While there was this space, 'it wasn't a very wide berth' says Ballim.
"The Reserve Bank has been telegraphing for a length of time let's call it a conservative stance. We know also that in posture the Governor himself will not over-reach, and certainly not with haste."
"25 basis points chimes very elegantly with the messaging up until this point, and perhaps the idea of 50 points has been opened up."
Goolam Ballim, Chief Economist - Standard Bank
The possible opening up of this idea could be attributed partly to the US Fed acting fairly boldly, Ballim believes.
Another reason is South Africa's inflation prognosis - especially over the near term has improved quite markedly he says, because of the notable softness of fuel prices.
Scroll up to listen to Ballim's analysis, and watch the Governor's address below