Tag: interest rate

The fallout from the COVID-19 pandemic will see the battle of the banks intensify, as both legacy and challenger financial institutions race to use tech innovation to gain a competitive advantage in 2020/2021. To some extent, history may be repeating itself, as the financial pressure exerted by the pandemic forces bank management teams to pursue cost discipline while attempting to meet ever expanding customer expectations.

The Covid-19 crisis has brought much of the world economy to a sudden stop. Millions upon millions of people are in lockdown across the world, preventing them from working, buying, producing and selling goods and services. Global and local supply chains are interrupted, and small and large companies see a collapse in income. Households are under similar pressure.

The South African Reserve Bank (SARB) cut rates by another 100 basis points this morning in an inter-meeting move. Rates are now down 225 bps since the start of the year, and down 250bps since July last year.

Recent weeks have seen the local market hit by a triple whammy. Both local and global markets have crashed as the economic impact of the COVID-19 pandemic begins to be felt resulting in a market sell-off; a rapid decline in oil prices has created a global supply shock. In addition to that, ratings agency Moody’s downgraded South Africa’s credit rating to junk or sub-investment grade.

Local investors should stay invested to reap strong future returns. An early decisive response to the COVID-19 threat should contain the spread of the virus in South Africa, but the economic repercussions in the short term will be costly. Local measures to contain the virus will add to an already weak economy and negative global impact.

The Monetary Policy Committee (MPC) unanimously decided to decrease the repo rate by 100 basis points to 5.25%. This somewhat unprecedented move was a direct result of the deterioration in economic conditions due to the COVID-19 pandemic experienced in South Africa and across the globe.

In the midst of a recessionary domestic economy, favourable inflation outlook and lower oil prices, the South African Reserve Bank (SARB) got room to cut interest rates by 100 basis points to 5.25%. A rate cut, downside inflation outlook and supportive rand boost agriculture rebound.

The South African Reserve Bank has decided to keep interest rates unchanged. Interest rates stability coupled with a recovery in the economy during the second quarter provides consumers and SMEs a window of opportunity to review finances. More importantly, Moody’s wait-and-see approach with respect to our country’s rating is another incentive for South Africa to stimulate economic recovery.

The last few months have left South Africans reeling. A volatile and unstable economy, concerns around government corruption, crime at an unsurpassed high and soaring price, are leaving citizens disheartened and concerned about their future in our country.

From Trump’s trade wars and Brexit woes to the looming threat of a credit rating downgrade in South Africa, rising waves of political and market volatility have left more and more investors wondering whether it wouldn’t be better to keep assets safely tucked away in cash.