COVID-19, an unprecedented pandemic, has caused harm in the world’s economy.
The South African government, through the Monetary Policy Committee, has announced a reduction in the repo rate.
What does this move mean?
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How much impact will it have on the country’s economy?
Read on to find out!
Repo means Repurchase Agreements or Repurchasing Option.
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The reserve bank lends money to commercial banks in exchange for the security that the banks provide.
The reserve bank increases and decreases the rates depending on the inflation rates of the economy.
The reserve bank buys bonds and gold from commercial banks in exchange for cash.
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Repo and reverse repo
What is Reverse Repo?
Reverse Repo rate refers to the rate at which the reserve bank buys from the country’s commercial banks.
What is the repo market?
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The new rate will take place on 15th April 2020.
The move will equally increase the liquidity of money in the economy.
It will also increase the government bonds markets; hence, reduce the capital requirements of firms and households.
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The current South African rate is 4.25%.
How does the repo rate affect me?
This means that customers can take loans from commercial banks at a lower rate as well.
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Repo rate is a situation that happens when commercial banks borrow money from the South African Reserve Bank.
The government urges firms and households to take advantage of this opportunity to meet their capital requirements.
DISCLAIMER:This article is also intended for general informational purposes only and does not address individual circumstances.
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Any action you take upon the information presented in this article is strictly at your own risk and responsibility.
She graduated from Meru University of Science and Technology with a Bachelor of Technology in Civil Engineering in 2019.
In 2023, Priscillah finished the AFP course on Digital Investigation Techniques.
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She has been writing articles on Briefly.co.za since 2019.
Email: pshmueni@gmail.com
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