The South African Reserve Bank announced on Thursday that the repo rate would come down by 50 basis points making it 11.5%.The prime lending rate that consumers will get is now 15%.
Tito Mboweni then surprised some people by announcing that the South African economy is not in a recession.He did however concede that certain sectors where in recession such as the retail sector.Economists have already predicted we are headed for a recession and have given a number of reasons for their predictions,like increased job loss,less passengers booking flights and falling commodity prices to name a few.
Further bigger rate cuts are also expected as we enter 2009 ,but all these cuts will only really affect consumers in a positive way over the long term.What the reserve bank is hoping to do is stimulate consumer spending again by cutting the repo rate which will make things more affordable over the long term.
Consumer spending in turn stimulates economic growth and this is good for everybody.So it is a step in the right direction but we will be waiting a little while before we feel the effects of this rate cut and the others to come.
