The Reserve Bank has cut interest rates by one percentage point for the second time in just less than a month, bringing the repo rate down to 4.25% on Tuesday morning.

The 100 basis point (bps) cut on Tuesday follows a 100bps cut on March 19. In January, the Bank cut interest rates by 25bps.

The move comes amid a wave of cuts by global central banks in an attempt to offset the economic damage from the Covid-19 pandemic. According to the Bank this is the lowest the repo rate has been.

It also follows an announcement by President Cyril Ramaphosa on Thursday that SA’s 21-day lockdown has been extended until the end of April.

The cut is clearly a response to the extension of the lockdown, and the depth of SA’s impending recession is likely worrying the central bank, said Capital Economics chief emerging-markets economist William Jackson in a note.

“The government will undoubtedly have to do more to support households and companies facing a dramatic loss of income,” said Jackson. “But, with poor public finances likely to constrain the size of the response, monetary policy will have to do more of the heavy lifting.” 

The rand weakened after the announcement, down 0.2% at R18.12/$ in morning trade. The R2030 government bond was stronger, with its yield falling 13bps to 10.78%. Bond yields move inversely to bond prices.

Update: April 14 2020 
This article has been updated with comment and financial information.