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The global economic landscape has undergone a seismic shift since the arrival of COVID-19 over a year ago. However, while the pandemic caused significant business challenges, it also triggered and accelerated many innovations as organisations adapted to change, often simply to survive.
All five members of the Monetary Policy Committee (MPC) decided to keep the repo rate unchanged at 3,5%. It has been on this level since 23 July 2020. The MPC viewed the overall risks to the Consumer Price Index (CPI) outlook to be on the upside compared to balanced in the March 2021 statement. This means the MPC’s interest rate outlook is more hawkish.
Against the backdrop of easing lockdown restrictions and a reassuring National Budget, the South African Reserve Bank’s (SARB) decision to keep the repo rate unchanged provides further impetus for more sustainable economic activity.
The South African Reserve Bank’s decision to keep the repo rate unchanged at a record low of 3.5% and prime lending rate at 7% eases pressure on the ailing economy and debt burden for businesses and consumers. This will help to support SMEs who continue to struggle financially due to the persistent impact of COVID-19, while trying to recover as quickly as possible.
The Monetary Policy Committee (MPC) decided to leave the repo rate unchanged at 3.5%. Three members of the committee preferred to leave rates unchanged, while two members preferred a 25 basis point reduction to the repo rate. This serves as a guide to the expectation that rates are more likely to decline than increase under current economic conditions.
High on the agenda of Finance Minister Tito Mboweni’s supplementary budget speech on Wednesday 24 June was the need to support the economy as it gradually reopens as well as to get businesses moving again. Notably, Mboweni announced amendments to the COVID-19 guaranteed loan scheme that was introduced at the beginning of lockdown, offering some relief to struggling businesses.
The Monetary Policy Committee (MPC) once again unanimously voted in favour of lowering the repo rate this month, although 2 out of the 5 members preferred a shallower cut. In a vote of 3 to 2, the MPC decided to lower the repo rate by 50bp to 3.75%.
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 Bureau of Economic Research released the Business Confidence Index (BCI) for third quarter of 2019. The index plummeted to a 20 year low of 21 index points. The BCI remained unchanged between the first and second quarter of 2019, before weakening in the third quarter. The BCI has trailed below the 50 neutral mark (a value above 50 signals optimism and pessimism is indicated when the value dips below 50) for the 19th consecutive quarter.
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