Governor Kganyago makes his toughest decision ever on rates - will it help?

The SA Reserve Bank's monetary policy committee cut the repo rate by 100 basis points from 6.25% to 5.25% on Thursday.

Dr Thabi Leoka, economist, gives her views on how much the rate cut will help, if at all.

He warned that there is pressure for the reserve bank to cut rates a lot more deeper, but we need to be aware of the impact of a rate cut. I calculate that a 100 basis points will stimulate the economy by just zero-point- three percentage points. In a normal environment that could be uplifting but we are currently in a recessionary period and with the uncertainty of the coronavirus - and we don't know how prolonged it will be - that percentage point could be depleted very quickly.

Dr Thabi Leoka, economist

We've seen other central banks defend their economies where they put fiscal support and quantitative easing towards supporting the economy. There are various ways that countries have supported their economy. in SA we don't have the fiscal space to do so.

Dr Thabi Leoka, economist

The huge deficit that we have that's projected to be minus six point eight per cent of GDP is coming to haunt us. I fear that in this quest for liquidity we may not see investors coming back into bonds especially risky bonds or risky countries like SA. As they say, when the tide pulls back we know now who has been swimming naked. Our deep debt is exposing us.

Dr Thabi Leoka, economist

Listen to the entire interview below.

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