S A Reserve Bank | WhaleTales Blog by Chris von Ulmenstein

In the spirit of Christmas, we will only award a Sweet Service Award this week. The winner is the SA Reserve Bank, which decreased interest rates by 5 percentage points in the last twelve months. Without this decrease, most business and property owners would not have survived the rough past year. While the interest rates are still very high relative to other countries, and the interest rate decreases may not have been a boost to the economy as such, they certainly prevented a collapse of the economy.

The WhaleTales Sweet & Sour Service Awards are presented every Friday on the WhaleTales blog. Nominations for the Sweet and Sour Service Awards can be sent to Chris von Ulmenstein at info@whalecottage.com. Past winners of the Sweet and Sour Service Awards can be read on the Friday posts of this blog, and in the WhaleTales newsletters on the www.whalecottage.com website.

Governor of the Reserve Bank, Tito Mboweni, caught the market and most economists by surprise today, by cutting the interest rate by 50 basis points, to 7 %, a positive sign that may signal a reversal of the credit crunch.

The interest rate is an indication that the recovery of the economy has not been progressing as speedily as the government would like it, given the previous interest rate cuts since December. It could also be Mboweni bowing to the pressure from trade union federation COSATU for a cut in the interest rate. Finally, the cut may be a reflection of the slow but certain decrease in the rate of inflation.

The cut in the interest rate eases the pressure on family and buusiness incomes, and should have a positive effect on tourism.

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