SARB 0.5% Cut Drops Prime Rate to 10%

By Cees Bruggemans, Chief Economist FNB
25 March 2010

In a difficult but unanimous decision, the SARB MPC dropped interest rates by 0.5%, with prime falling to 10%, which is the lowest prime has been since 1981.

This small further rate reduction should assist the economy’s recovery this year and next, with SARB upping its GDP growth forecast for 2010 to 2.6%.

CPI inflation is expected to drop further in coming months, while the economic recovery is likely to remain gradual.

I don’t foresee further rate cuts this year, but expect current rates to remain ‘low for long’, probably well into next year.
 
Cees Bruggemans is Chief Economist of First National Bank. Register for his free e-mail articles on www.fnb.co.za/economics.

Greg Beykirch | Financial Manager