Bank joins global fight against virus

present mechanisms we have are adequate to deal with those stresses.”

Analysts have raised questions over what the market fragility means for the government as well as financially fragile state-owned entities.

Deputy governor Fundi Tshazibana said policymakers were “actively monitoring the situation” in government bond markets and had a number of mechanisms that would allow them to respond should that be necessary.

Along with the cut which brings the repo rate to 5.25% — the Bank downgraded its growth and inflation forecasts.

It sees inflation averaging 3.8% in 2020, way below the midpoint of its 3% to 6% target range. Inflation would then accelerate to an average 4.6% in 2021, before slowing to 4.4% in 2022, it said.

The Bank’s quarterly projection model, which is not a forecast, signalled three cuts of 25 basis points each, in the second and fourth quarter of 2020, as well as in the third quarter of 2021.

The decision to front load these and add another reduction came against the backdrop of supply and demand side constraints in the economy, said Sanisha Packirisamy, economist at Momentum Investments.

The Bank wanted to get the “best bang for its buck” in the face of SAs dismal confidence levels, she’ said. It had policy room to cut rates further if _needed — though it was likely to take “a wait-and-see approach”.

The government has promised a package of economic support measures, which it has yet to outline, though there is limited room in the fiscus, which was already under pressure before the virus struck.

The cut “will not offset the global recession that is coming. What this can do is help encourage a rebound from economic distress once this virus issue is finally solved”, said Jameel Ahmad, FXTM global head of currency strategy and market research.

“There is definitely still a case for more stimulus – look at the global central bank narrative right now.”

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