Guiding consumers since 2009

If global banks cut rates, SA may well follow

By Staff Writer

If global banks cut rates, SA may well follow 

By Stephen Gunnion
From Business Day

Compare banks, get quotes and save with Justmoney.co.za. The global crisis is going down, and the question is what will South Africa do? Justmoney helps you compare and find out.
 

SA may join in the next round of co-ordinated interest rate cuts if other central banks trim lending rates again to try to stimulate growth and prevent a global recession, First National Bank (FNB) chief economist Cees Bruggemans speculated yesterday.

Speaking at a panel discussion at the Gordon Institute of Business Science, he said the country would probably prefer to "go with the herd" than "stick out like a sore thumb".


Earlier this month central banks in Asia, Europe, the US and Australia cut interest rates to help stimulate the global economy following the financial crisis. Yesterday, India's central bank joined in, cutting interest rates by 100 basis points, the first reduction since 2004.


There are hopes of further co-ordinated interest rate cuts by central banks to help offset the expected slowdown.


However, the South African Reserve Bank held rates steady at the latest meeting of its monetary policy committee this month, saying the rand's depreciation posed a threat. SA's financial system had remained stable in the face of the global turmoil, Bank governor Tito Mboweni added.


However, Bruggemans said, while inflation posed a risk, high interest rates would erode economic growth.


The rand's steep fall last week has raised the red flag for inflation and is expected to cut into the benefits of the weaker oil price. Bruggemans said the rand was now 30%-40% undervalued and could become a lot more so before it improved.


But he noted that other emerging market currencies had also fallen sharply.


Nedbank chief economist Dennis Dykes told the forum that the currency was likely to recover, although probably not to previous levels. He expected the dollar to weaken in the longer term as it lost its safe haven status.


FNB CEO Michael Jordaan said that while it appeared that large corporates were reining in spending on large capital projects in response to the global slowdown, the government would act as a "shock absorber" as it continued spending on projects such as the 2010 Soccer World Cup and other infrastructure.


Market commentator David Shapiro of Sasfin Securities said the market was keeping a "keen eye" on how SA-listed companies were handling the crisis. While companies had been reporting exceptional results, the concern was how profitable they would remain in the face of a global slowdown.


"If we produce the profits of last year, then the market is very cheap," Shapiro said.

Recent Articles

Featured Debt counselling – the two sides of the coin

Being overindebted doesn’t just put a strain on your personal finances; it also puts a strain on your state of mind. The best solution is to start the process of debt counselling so that you can escape the debt cycle. But what are the ups and downs of joining this debt relief programme?

Travel ban – how to claim for the loss incurred

As with the recent Covid-19 pandemic, governments sometimes issue travel bans to prevent people from travelling to other countries. This becomes even more complicated if you’ve already planned and paid for your trip. Your flights will be cancelled, and you may lose money from cancelled accommodation arrangements. How do you claim for the financial losses incurred due to a travel ban?

How to finance and insure a second-hand vehicle

Buying a second-hand vehicle may suit your budget better than acquiring a new one. But what impact does an older model have on vehicle finance and car insurance? We reached out to specialists in the field to explain what the financial implications are of pursuing a second-hand vehicle.

Reading your loan agreement: look out for this

Many people don’t read their loan agreements. They just sign on the dotted line without realising that they could be signing their lives away. But it’s important to review your loan agreement before and after taking your loan to avoid future setbacks.

 

Deals

Udemy online course for R180

Price: R180
When: Until 27 March 2020
Where: Online

Educate your kids for free with Skills Share

Price: Free
When: Daily
Where: Online

Take advantage of payment holidays from Standard Bank and Nedbank

Price: Free
When: From 1 April to 30 June 2020
Where: Nationwide