Economists divided over Reserve Bank next repo rate move

Economists are divided over whether the Reserve Bank will further cut the repo rate or keep it unchanged when it announces its decision this week.

While some say the Monetary Policy Committee will likely cut the repo rate on the back of materialising downside risks to both its inflation and growth forecasts, some say rates may remain unchanged as the bank is assessing the impact of the earlier rate cuts.

Consumer inflation is at its lowest in almost 16 years and it’s expected to remain subdued for some time. The Reserve Bank is also expected to revise downwards its Gross Domestic Product (GDP) forecast as COVID-19 continues to weigh on growth.

At its May sitting, the bank said it expects GDP in 2020 to contract by 7%. The bank has already cut the repo rate by 275 basis points this year, to cushion consumers and businesses against the effects of the coronavirus pandemic.

Those that expect further cuts are forecasting 25 basis points taking the repo rate to 3.50%.

Others say the Reserve Bank will likely keep the repo rate unchanged for now as there is a room for a cut later in the year.

While the lower interest rates are welcomed news to indebted consumers, it hurts the pockets of those with savings and depends on interest earnings.

SABC News reporter  Gloria Sefako reports further below:

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