The South African Reserve Bank cut interest rates of 25 basis points from 6.75 percent to 6.5 percent, much to the delight of South Africans on Wednesday.
The upbeat economic growth for the fourth quarter together with Moody’s decision that showed an improvement in its outlook from negative to stable were among the contributing factors of the rates cut.
South African Consumer Inflation Rate
The consumer inflation rate has been within the central bank’s 3 percent to 6 percent range since last year in April. Data released showed that the consumer inflation rate in February slowed to 4 percent compared to the 4.4 percent in the previous month.
Although the cut rate was what many South Africans had hoped for, offering relief to consumers, they will have to endure an increase in VAT from 14 percent to 15 percent on April 1, together with petrol price increases.
Cuts No Surprise
Annabel Bishop at Investec said that the market had expected the rates cuts with a 50-50 chance and it came as no surprise.
Against the U.S. dollar the South African currency, the rand has appreciated 4.8 percent and against the euro it has appreciated 3.2 percent.
Costs of imports into South Africa have been reduced, boosted by the rand following the resignation of President Jacob Zuma.
Bonds Have Doubled
According to the Johannesburg Stock Exchange data South African bonds has more than doubled in the past year from 7.2 billion rand to 16.5 billion rand.