Pretoria: The South African Reserve Bank’s Monetary Policy Committee (MPC) has, in a unanimous decision, opted to cut the repo rate by 25 basis points, bringing it down from 8% to 7.75%, effective from Friday. This marks the second consecutive repo rate cut under Reserve Bank Governor Lesetja Kganyago, following the recent MPC meeting.

According to South African Government News Agency, Governor Kganyago indicated that the decision to lower the policy restrictiveness aligns with the goal of achieving the inflation target. He emphasized that the risk outlook necessitates a cautious approach, noting that global interest rates could rise again. The recent depreciation of the Rand highlights the volatility of changes in the global environment affecting South Africa.

The forecast anticipates further rate easing in the future, potentially stabilizing slightly above 7%. However, Kganyago clarified that this rate path from the Quarterly Projection Model serves as a broad policy guide. The MPC intends to make decisio
ns on a meeting-by-meeting basis, without forward guidance or pre-commitment to any specific rate path. Decisions will continue to be outlook dependent, responsive to data developments, and sensitive to the balance of risks to the forecast.

The announcement follows Statistics South Africa’s report of a dip in inflation to 2.8%, the lowest since June 2020, and below SARB’s inflation target range of 3-6%. In response, Kganyago stated that the SARB views the inflation outlook risks as balanced, anticipating a moderation in inflation expectations, which have historically been backward-looking with higher past inflation projected into the future.

Kganyago expressed confidence that the current policy stance and the experience of lower inflation would anchor expectations more firmly at lower levels. While short-term inflation appears well-contained, he warned of high uncertainty in the medium-term outlook, with potential risks including higher prices for food, electricity, water, insurance premiums, and wage settl
ements.