SARB expected to cut repo rate by 0.25%

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Wednesday, 28 March will see the conclusion of the South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) meeting and in turn the decision whether or not there will be a change South Africa’s lending rates.

Recent Consumer Price Index (CPI) data released by Statistics South Africa (Statssa) has shown year on year inflation in February 2018 to be around 4%, well within the Reserve Banks targeted 3% to 6% range. A firmer rand on the back of a weaker dollar and improved business confidence in South Africa (aided by recent leadership changes) has helped tame inflation in the near term.

Friday’s (23 March) news that Moody’s Investor Relations has decided not to downgrade South Africa’s local currency credit rating to sub investment grade (“junk”) also removes a near term risk factor for inflation and South Africa’s cost of borrow.

South Africa’s repo rate (the rate at which banks borrow from the Reserve Bank) currently sits at 6.75% and the prime lending rate (to consumers) is at 10.25%. Expectations are, in a slight majority, that lending rates could be lowered by 25bps (0.25%).

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.

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