The South African Reserve Bank this week took markets by surprise, slashing interest rates by a whopping 100 basis points from 6.25% to 5.25% with effect from tomorrow.
This means a person with a R1 million debt gets relief estimated at almost R350.00 per month.
The decision comes in the wake of government announcement that the number if South Africans infected by Covid-19, otherwise known as Coronavirus, has now hit 150.
Economists were expecting a cut of 50 basis points following large cuts by the US Federal Reserve and the Bank of England in response to the negative impact of coronavirus on the global economy.
Reserve Bank governor Lesetja Kganyago said the coronavirus will negatively affect global and domestic economic growth through the first half of 2020, and potentially longer depending on steps taken to limit its spread.
“Monetary policy can ease financial conditions and improve the resilience of households and firms to the short-term economic implications of Covid-19. Our decision and its magnitude seeks to do this in the near term,” Kganyago said.
“Monetary policy however cannot on its own improve the potential growth rate of the economy or reduce fiscal risks.”
All eyes will now turn to Finance Minister Tito Mboweni to see what stimulus package he will announce to aid the economy battered by load shedding and the coronavirus.