Mboweni Announces 100-Basis Point Cut

The information in this article is courtesy of iAfrica (Hundereds, Bru! – 24 March 2009)

Governor Tito Mboweni announced yesterday that the repo rate would be cut by 100 basis points to 9.5%, while the prime lending rate has been reduced to 13%.

Mboweni explained that the decision was made due to the weakening economy as a result of the turmoil in the financial markets.

"Against this backdrop of widening domestic and global output gaps, the balance of risks to the inflation outlook has changed somewhat," he said.

According to Mboweni, the inflation measured 8.1% in January 2009. Food and non-alcoholic beverages contributed 2.4 percentage points to the total inflation while housing utilities contributed 2.1 percentage points of the total inflation.

He warned, however, that even though the central bank would hold more frequent policy meetings, it did not imply that rates would be cut every month.

The cut is in line with market expectations with 24 of 28 economists polled by Reuters last week predicting a 100 basis point reduction.

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