MPC preview: Interest rates continuing lower

Economic outlook has deteriorated since previous policy meeting

The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) meets again on May 17-19 to discuss interest rates and other monetary matters.

SARB cut interest rates by 225 basis points in 2020 so far

The MPC has reduced interest rates on three occasions this year. On January 16, policymakers reduced the repurchase (repo) rate by 25 bps to 6.25%, after the central bank significantly lowered its inflation forecast. Both actual and expected price trends moved lower in the months leading to the January 2020 meeting while economic growth remained in the doldrums.

On March 19, the SARB made a larger-than-expected 100 basis points cut in the repo rate to 5.25%. As the reality of the global economic slump - and the impact thereof on the South African economy – became clearer, the central bank used the room provided by very favourable inflation conditions to provide some monetary stimulus to the local economy.

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