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South Africa Central Bank Slashes Key Rate By 100 Bps, Sees More Easing Ahead

South Africa's central bank cut its key interest rate on Thursday and expects to lower it more this year to support the economy amid the spread of the coronavirus, or Covid-19.

The Monetary Policy Committee unanimously decided to cut the repo rate by 100 basis points to 5.25 percent, South African Reserve Bank Governor Lesetja Kganyago said in a statement.

The central bank also projected three repo rate cuts of 25 basis points each in the second and fourth quarter of 2020, as well as in the third quarter of 2021.

"Monetary policy can ease financial conditions and improve the resilience of households and firms to the short-term economic implications of Covid-19," Kganyago said. "Our decision and its magnitude seeks to do this in the near term."

However, the SARB chief stressed on the need for fiscal response and structural reforms for long-term relief.

Citing a fragile economic outlook, the bank said it now expects economy to contract by 0.2 percent in 2020. GDP growth is expected to rise to 1.0 percent in 2021 and to 1.6 percent in 2022, the bank added.

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