- The commercial banks in South Africa have announced a cut into their prime lending rates, following today’s decision by the Reserve Bank to further lower the repo rate by 50 basis points.
Commercial banks such as the First National Bank (FNB), Nedbank, Standard Bank and Absa have also announced they will cut their prime rates by 0.5 percent down to 10 percent, effective from the end of the month.
The Reserve Bank’s decision, which has been criticised at some quarters, brings the repo rate to 6.5 percent.
Several economists have been reported in the local media criticising the decrease in the repo as suicidal to the Rand which was already gaining against major world currencies. The Rand had actually weakened following the announcement of the decision, some pointed out.
However, for some, the cut was still within acceptable range for the country to recover fully from the global crisis inflicted recession in South Africa.
"Today's cut takes us to historically low rates last seen in 1981. We have already noted a material improvement in consumer confidence," Michael Jordaan, CEO of FNB was quoted to have said.
On her part, the Reserve Bank Governor, Gill Marcus, defended the decision saying that while an appreciated rand exchange rate is a positive factor in the inflation outlook, an excessively strong exchange rate is a cause for concern from the perspective of overall macroeconomic balance.
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