- Changes in the repo rate: The repo rate is the interest rate at which banks borrow money from the central bank. When the SARB raises the repo rate, it becomes more expensive for banks to borrow money, which can lead to higher lending rates for consumers and businesses. Conversely, when the SARB lowers the repo rate, it becomes cheaper for banks to borrow money, which can lead to lower lending rates.
- Quantitative easing: Quantitative easing (QE) is a monetary policy tool that involves the central bank buying financial assets, such as government bonds, in order to increase the money supply and stimulate economic growth. QE can lead to lower interest rates, as the central bank is effectively flooding the market with money, which can make it cheaper for businesses and consumers to borrow.
- Forward guidance: Forward guidance is a communication tool used by the central bank to provide information about its future monetary policy decisions. Forward guidance can influence the price of capital by signalling the central bank's intentions regarding interest rates and other monetary policy measures. For example, if the central bank signals that it plans to keep interest rates low for an extended period, it can lead to lower long-term interest rates and encourage investment.
By using these tools, the SARB can influence the price of capital and affect the cost of borrowing for businesses and consumers. This can have a significant impact on economic activity, as investment and consumption are influenced by the cost of borrowing.