PPS Investments: MPC Commentary

The South African Reserve Bank surprised the market by announcing a further 100 basis point cut in the repo rate.

This reduces the repo rate to 4.25%, which is the lowest for a number of decades and definitely since inflation targeting was introduced in early 2000.

While the market was expecting a rate cut in the next Monetary Policy Committee meeting, this was only due in May.

This highlights the attempt at providing some relief to consumers and the economy as a whole and probably the view that inflation is likely to be subdued.

In the PPS portfolios we have actively increased the domestic bond exposure to take advantage of the high real yields available.

The cut in interest rates will result in a decline in the yield in fixed interest assets, particularly cash, but will be beneficial to the capital component of bonds.

We will continue to monitor the local and global economic situation and how best to manage portfolios as new information becomes available.