The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) has voted to cut the country’s interest rates by 25 basis points.
This brings the repo rate down to 7.25% and the prime lending rate to 10.75%.
As anticipated by economist polls and analysis ahead of the meeting, the decision was not unanimous – but surprisingly, none of the members voted to hold
Five members voted for a 25 basis point cut and one voted for an even bigger 50 basis point cut.
Reserve Bank governor Lesetja Kganyago said that since the previous meeting, global economic conditions have been volatile.
“Higher tariffs on imports into the United States have been announced, and then partly reversed. US assets have sold off, while alternative safe havens, such as gold and the euro, have performed well,” he said.
“The combination of higher trade barriers, plus elevated uncertainty, is likely to weaken the world economy. We have therefore lowered our global growth projections.”
He noted the US Fed has opted to hold its rates, but other central banks have been cutting rates.
For South Africa, data has been lagging. While there is no official GDP data for the first quarter yet, he said indicators for sectors like mining and manufacturing have been disappointing.
Unemployment has also risen. As such, GDP projections have been cut to only 1.2% in 2025, rising to 1.8% in 2026.
Inflation has been tracking below the Reserve Bank’s target range, driven predominantly by lower fuel costs. Average inflation expectations for the year have thus been pulled lower
This also reflects the removal of a VAT hike from the picture, which was included as a risk factor in the bank’s last calculations.
Given this backdrop, the bank opted to cut rates, bringing some relief to consumers.
Source: Business Tech
