Tag Archives: Tito Mboweni

Interest rate drops by another 1 %

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.

Interest rate cut welcomed

The 1 % cut in the interest rate, down to 14 %, is widely welcomed, and should be excellent news for the tourism industry.   

The announcement by Reserve Bank Governor Tito Mboweni yesterday was accompanied by a warning to local politicians about the global credit crunch, and the effect that it could have on South Africa.   “We are going to go through a rough patch over the next three or four years”, he said, reports Business Report.  He did not foresee a recession for South Africa, but described the recent World Economic Forum as “a memorial service for the world economy”!

Mboweni wanted to cut the rate by 2 percentage points, he said, but stated that his committee had urged him to take a more cautious approach to the interest rate cut.  A further 1 % cut in April appears likely.

The interest rate cut good news should offset the disappointing increase by 61 cents per litre in the price of petrol earlier this week.