Rate cuts may mean more bad news for rand as real yields go negative

While the slide that pushed US oil futures below zero could create space for the Reserve Bank to cut interest rates further, this might not be good news for SA’s battered currency that breached R19/$ again on Tuesday.

SA’s central bank has cut the repo rate twice in the past five weeks to support an economy that it expects to contract more than 6% in 2020. The collapse in oil prices means there is a danger that the Reserve Bank could miss its inflation target of 3%-6%  to the downside. The repo rate is down 225 basis points in 2020 so far, the lowest level since its introduction in 1998.