Fitch Solutions, a unit of the Fitch Group said today, it expects South Africa’s economy to shrink by 6% this year on the back of the COVID-19 pandemic.
The research agency, in a research note, said it expects the South African Reserve Bank (SARB) to respond to the downturn by cutting the repo rate which the central bank charges commercial banks to 3.25%.
“The policy rate now stands at 4.25%, its lowest level since 1973, but we expect the back to make a further 100bps (basis points) of cuts over the remainder of 2020, as inflation remains reasonably contained and the economy faces severe domestic and global headwinds,” analysts from Fitch Solutions said.
The SARB this year has taken a dovish stance when it comes to monetary policy.
The SARB cut its benchmark rate by 25 basis points (bps) to 6.25% in January and a further 100bps in March, before implementing a further “emergency” cut of 100bps this week (having brought forward their scheduled meeting from May) to support the slowing economy amid the COVID-19 pandemic.
