Interest rate cut welcomed by motor industry amid economic pressures
The South African Reserve Bank's (SARB) decision to lower interest rates by 25 basis points – bringing rates to their lowest level in more than two years – has been welcomed by the retail motor sector.
Image: Pixabay
The South African Reserve Bank's (SARB) decision to lower interest rates by 25 basis points – bringing rates to their lowest level in more than two years – has been welcomed by the retail motor sector.
The cut puts the repo rate at 7.25% and the prime lending rate will be 10.75%.
The SARB's Monetary Policy Committee said it had decided on a cut of 25 basis points because higher trade barriers and elevated uncertainty was likely to weaken the world economy.
"While the inflation outlook appears benign, we considered an adverse scenario, which illustrates the upside risks. This was based on a global slowdown, triggered by escalating trade tensions, where the rand depreciates sharply. The scenario showed how a country with some fundamental vulnerabilities, like South Africa, risks stagflation, with growth moving lower while inflation rises due to currency weakness. In these conditions, monetary policy tightens to stabilise the macroeconomy."
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Brandon Cohen, chairperson of the National Automobile Dealers' Association (NADA), said the rate cut is a "positive move at a time when South African consumers are under immense financial pressure."
'While it's not a dramatic kick-start to the economy, it does serve as a much-needed nudge in the right direction.'
NADA said the reduction in interest rates, although modest, could offer some short-term relief for stretched households – particularly with the fuel levy and other cost increases looming in June.
'Even small savings on monthly bond repayments, credit cards, and vehicle finance do add up,' Cohen said. 'They can make a meaningful difference for consumers who are having to make every rand count.'
The automotive industry, which has experienced subdued demand amid a flat economy, may also benefit from the easing of monetary policy.
'Historically, it takes several months before we see the effects of a rate movement reflected in vehicle sales,' Cohen added. 'A rate cut helps to build consumer confidence and creates slightly more room for discretionary spending.'
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Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad Loading "In this situation, the benefits would also fall to all South Africans meaning that lower inflation would preserve the value of the earnings and wealth in future periods. Given the low inflation that we are currently experiencing this would be the right time to institute such a change," Blackmore further added. 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