Cash-strapped South Africans are delighted that the Governor of the Reserve Bank, Tito Mboweni, decreased the interest rate by 1 % point, to 7,5 %, yesterday.
Mboweni announced the interest rate cut a day after the official announcement that South Africa is in a recession, having experienced two successive quarters of negative economic growth. The economy contracted by 6,4 % in the first quarter of 2009, Mining and Manufacturing taking the biggest knocks, at 33 % and 22 %, respectively. The category “Wholesale, retail, restaurants and hotels” had the smallest decrease, at 2,5 %, while the construction sector grew by 9 %, reports The Times.
Mboweni made his announcement against the background of a downward inflation trend, expected to average 6,9 % this year and 5,5 % in 2010, with food inflation peaking at 17 % but slowing down (Mboweni blamed a food cartel for the high food inflation); the second quarter is expected to have a lower negative growth rate compared to the first quarter; and the global downturn is showing “tentative signs” of “bottoming out”, according to Moneyweb.
The interest rate cut is the fifth since Mboweni started cutting the interest rate in December 2008. Consumers are hoping for a drop in the price of petrol next Wednesday too.
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