The Monetary Policy Committee cut the Repo Rate of South Africa by 100 basis points! This brings the repo rate to 10.5% and the prime lending rate to 14%
This significant cut in the repo rate broke the MPC's 5 year old tradition of 50 basis point increment adjustments
This is great news all around for local businesses and especially the property market in South Africa, that severely felt the global economic credit crunch along with the high interest rates. This caused the house price index to start a nose-dive over the last couple of months.
According to Reuters most economists forecasted the 100 basis point cut, and some thought only a 50 basis point cut was on the tables.
The Monetary Policy Committee stated that rate cuts by other central banks worldwide along with the slowdown of the South African economy and no real hope for growth in 2009 as the key factors influencing their decision.
The MPC should keep dropping interest rates over the next year as lower fuel and food prices bring the inflation rate back into South Africa's target of 3-6%.
Read the MyRoof.co.za forecast on interest rate cuts before the announcement was made.