Economist Maudi Lentsoane predicts that the South African Reserve Bank (SARB) is likely to cut the repo rate further when its monetary policy committee concludes its meeting on Thursday.
Last month, the bank cut the repo rate by 100 basis points.
This brought the repo rate down to 4.25%. The prime lending rate now stands at 7.75.
The last time the repo rate was lower than this was in 1973, at 3.14% in response to oil prices.
Lentsoane, CEO of Lehumo Investments, says the bank’s response to the COVID-19 pandemic has been commendable.
“We are dealing in 2020 with a crisis which we’ve never seen and many have never witnessed before, hence the need for the central banks across the global to really react.”
”They’ve responded with speed. Well, I think the crisis that we are facing does require that action is taken swiftly. And also, there is no time to delay because the crisis has been affecting many economies at a very fast speed,” explains Lentsoane.
The rand edged up on Wednesday as global risk appetite improved on hopes of an economic recovery, though investors remained cautious a day ahead of a Central Bank rate decision.
Stocks continued their upward trajectory, following other global markets on renewed optimism of economies opening up and increasing demand.
At 1500 GMT, the rand was 2.15% firmer at R17.9510 per dollar, trading at its strongest levels since April 10.
The rand’s strength mirrored gains in the euro, which climbed towards a two-week high as a Franco-German proposal for a common fund that could move Europe closer to a fiscal union boosted demand for the currency.-Additional reporting by Reuters