The Monetary Policy Committee of the SA Reserve Bank wrapped up its two-day meeting and cut the repo rate by 100 basis points to 11 per cent on Thursday.

The SA Reserve Bank cut its repo rate by 100 basis points to 11 per cent on Thursday.

First National Bank was the first institution to drop its prime lending rate by one percentage point to 14,5 per cent, effective from Friday. Other banks are expected to follow soon.

“The welcome fall in inflation, and the prospect going forward that inflation will remain in line with the target range of 3-6 per cent, gives scope for an easing of the monetary policy stance. But against that, there needs to be balanced the continuing buoyancy of final domestic demand, and the risks to inflation from the specific sources of cost pressures identified above,” said SA Reserve Bank governor Tito Mboweni.

“Taking all this into account the Monetary Policy Committee has decided to reduce the repo rate by 100 basis points to a level of 11 per cent effective from August 15 2003. The course of any future movements in the repo rate, in either direction, will continue to be judged by the committee in the light of the outlook for inflation against the inflation target,” he said.

Analysts expect more reductions later this year. FNB chief economist Cees Bruggemans expects the prime interest rate to be as low as 12,5 per cent by the end of the year. The repo rate was cut by 150 basis points in June.

New vehicle sales increased by 7,6 per cent in July, primarily due to the interest rate cut in June. The latest cut is expected to boost motor industry sales even more.

Original article from Car