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Johannesburg - Reserve Bank Governor Gill Marcus cut interest rates by 50 basis points on Thursday, bringing the figure to 5.5%, in line with market expectations.
The rand is expected to weaken on the news. The unit has strengthened more than 28% since the beginning of 2009, largely due to capital inflows from investors in developed economies where rates are close to zero.
However, the rand is not expected to remain weak as capital inflows are anticipated to continue on the back of a $600bn stimulus plan by the US Federal Reserve.
The monetary policy committee (MPC) has cut rates by 6 percentage points since December 2008 to help the economy recover from recession.
Although consumer inflation is at a five-year low at 3.2% and there has been a recovery in consumer spending, the rate cut indicates the MPC's concern for SA's sluggish recovery.
The rand is expected to weaken on the news. The unit has strengthened more than 28% since the beginning of 2009, largely due to capital inflows from investors in developed economies where rates are close to zero.
However, the rand is not expected to remain weak as capital inflows are anticipated to continue on the back of a $600bn stimulus plan by the US Federal Reserve.
The monetary policy committee (MPC) has cut rates by 6 percentage points since December 2008 to help the economy recover from recession.
Although consumer inflation is at a five-year low at 3.2% and there has been a recovery in consumer spending, the rate cut indicates the MPC's concern for SA's sluggish recovery.
