Reserve Bank’s decision to cut interest rates welcomed

Some political parties in Parliament and Cosatu have welcomed the Reserve Bank’s decision to cut interest rates by 25 basis points.

However, some say despite the reduction, interest rates are still higher than before the COVID-19 pandemic. They say there’s room for more cuts to stimulate economic growth and to ease the pressure on households.

“While this will bring some relief to hardpressed households and businesses, we believe that there is efficient room for further rate cuts given that the inflation rate is at the bottom of the target of 3 to 6%. This is despite the governor referring to material risk globally and even the possibility of trade wars involving the US. We believe that this and further rate cuts will stimulate much needed economic growth and create jobs as long as inflation is kept under control,” says Steve Swart, ACDP MP.

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“It is important that now that we have low interest rates, that we avail capital for businesses to be able to start. So that people can be able to create work. We avail cheaper capital to make sure that we can fund infrastructure so that our economy can grow and ultimately to use this opportunity to be able to export goods,” says Mmusi Maimane, BOSA leader.

“We’ve got the Government of National Unity (GNU) to thank for this. The reason being we know the exchange rate responds strongly to the GNU, we saw that at the formation of the GNU, we saw that over the past weekend when there was tension within the GNU and we saw that again when our leaders started talking this week that the rand strengthened again. What happens then is that if the rand is strong the price of petrol is lower, which we know impacts on the price of food, otherwise known as inflation. What I’m really saying here is that as long as the GNU remains intact we will have conversations about reducing inflation and as a result reducing the rate announced by the MPC,” says Dr Mark Burke, DA MP.

“Workers spend most of their money on transport, petrol prices have gone up quite a bit food linked to the transport cost. Eskom has been pushing for a 36% tariff hike. So, yes, inflation is low, but most of the basket that workers spend their money on is actually above that and you don’t always find their salaries increasing. I think for us, it’s good news. We think there is space for more cuts. We hope the Reserve Bank will relief us more over the course of the year,” says Matthew Parks, Cosatu Parliamentary Coordinator.

Repo rate cut boosts disposable income: