The decision by the monetary policy committee to meet once every two months instead of quarterly has increased speculation of a further interest rate cut – possibly as early as August.

The decision by the monetary policy committee to meet once every two months instead of quarterly has increased speculation of a further interest rate cut – possibly as early as August.

The Reserve Bank dropped the repo rate by 150 basis points to 12 per cent on Thursday for the first time since 2001. The prime lending rate drops to 15,5 per cent.

Standard Bank, Absa, First National Bank and Nedcor, which includes Old Mutual Bank, Nedbank and People's Bank, immediately reduced their rates.

The rate cut is expected to have a positive effect on the economy and financial markets.

Reserve Bank governor Tito Mboweni said the four scheduled meetings were too widely spread. He said there was "sufficient high frequency data on the economy and inflation available to allow the MPC to deliberate effectively" every two months.

"The Reserve Bank will have three more opportunities to cut before yearend. We think that we will see 2-2,5 percentage points of further cuts by yearend," Credit Suisse First Boston analyst Peter Worthington told .

The rate cut should have a positive spinoff on car sales. A consumer who has bought a R100 000 car over 54 months will see his repayments go down from R2 715 to R2 636.

Original article from Car