Reserve Bank ‘running out of options’ is a huge concern

The SA Reserve Bank’s warning that they have no more wiggle room is of huge concern.

During a webinar on Sunday evening, Reserve Bank governor Lesetja Kganyago revealed they were running out of options to further lower rates in a bid to offer embattled consumers and businesses relief due to Covid-19, which has decimated the economy.

The Reserve Bank has already forecast that the economy could contract 7% this year.

Since January, the Reserve Bank has cut the repo rate by 275 basis points, last week lowering it from 4.25% to 3.75% – the lowest level since it was introduced in 1998.

Kganyago told Fin24: “We had buffers and we could dig into the buffers. There are 68 central banks in the world which adjusted the policy rate. We are among the ones which adjusted most aggressively. Partly because we had the space to do it.”

But the governor said the bank was “beginning to run out of space to further lower rates”.

It may be good news for those battling to pay their car and bond instalments, but it’s exactly the opposite for those with investments.

Easing the lockdown over the next few months is only expected to help the economy in the short term.

These are indeed tough times.

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