The Federal Reserve Bank in the US has cut its benchmark interest rate by 50 basis points (bps), 25 bps more than most market analysts anticipated. This unexpected monetary shift could pave the way for the South African Reserve Bank (SARB) to consider a similar move in its interest rate decision on Thursday.
While most analysts predicted a 25 bps reduction, it is understood that the SARB makes its decisions based on what it deems best for the economy, taking into account inflation expectations.
Lower interest rates lead to several positive effects, including:
Reduced borrowing costs for goods and services purchased on credit or financed assets.
Increased consumption expenditure, as lower credit costs enhance disposable income for households and consumers.
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