The Reserve bank cut the interest rate by 100 basis points or one percent last week. This was a not unexpected amount although it did not go far enough, fast enough for some commentators. The fact is a slower approach will make us less open to turbulence in the international market which is undergoing severe stress at the moment. The interest rate cut will affect your home loan, your car finance and any interest rate linked savings accounts you may have.
The financial papers had a look at the interest rate cut and as the Business Report put it 'Nobody feels enough is being done'. these kind of sentiments are all well and good but as the market is in general ruled by fear and greed these can be seen as the motivators to cut further and faster. These calls are also politically motivated and stem from Cosatu general secretary Zwelinzima Vavi, and Cope MP Phillip Dexter. Business Report also carried an article which stated that the DA were concerned that the Repo and inflation rates were too close together which gave the Reserve Bank little scope for manoeuvre.
Fin24 looked at the story from the angle of the building sector and warned that the rate cut was not going to lift the building sector any time soon as lead times from when an interest rat cut are enacted to when it actually manifests itself in the activities of the real economy are long, on the scale of around six months. With the interest rate expected to be cut further the upswing is only expected towards the end of the year. there was however a feeling that the markets were no longer reacting so vociferously to bad news which may mean that the worst is already behind us.