Image Source: Business Live
Local – Repo rate reduced to 7%. The South African Reserve Bank’s Monetary Policy Committee (MPC) has reduced the rate by 25 basis points, effective August 1, 2025.
Policymakers stated that the decision was made to maintain price stability while providing some relief to households and businesses.
At Thursday’s briefing, SARB Governor Lesetja Kganyago stated that the rate cut was a unanimous decision. He noted that improved currency strength and easing inflation expectations had allowed the MPC to adjust.
“The rand has strengthened, and inflation expectations have moderated,” Kganyago said. “The June Consumer Price Index (CPI) print showed headline inflation at 3% and core at 2.9%, still at the bottom of our target range.”
Inflation has remained low, but pressures from food and fuel prices persist. Kganyago said this would likely push inflation slightly higher before it stabilises later in the year.
“Food inflation has risen, mainly due to meat prices, and fuel prices are falling more slowly. We expect headline inflation to average 3.3% this year before stabilising,” he said.
Growth in the first quarter of 2025 was sluggish, coming in at just 0.1%. Revisions to earlier GDP data and assumptions about higher US tariffs have also dampened the outlook.
“There was a downward revision to earlier GDP data,” Kganyago said. “Combined with assumptions of higher US tariffs, this has caused us to mark down our 2025 growth forecast.”
Despite these challenges, the central bank expects reforms to improve economic performance gradually. Kganyago said persistent logistical issues and weak business confidence remained obstacles to stronger growth.
“The underlying trend remains low due to supply-side problems and declining business and consumer confidence. However, we still expect modestly higher growth in the coming years, supported by ongoing structural reforms,” he said.
The Governor added that the MPC would continue targeting inflation at the lower end of its range to ensure long-term stability. He said this approach would strengthen policy space and protect the economy from shocks.
“We will use forecasts with a 3% inflation anchor at future meetings and continue working with the National Treasury to achieve permanently low inflation,” Kganyago said.
Repo Rate Reduction Welcomed
The Government has welcomed the reduced repo rate as it would not only ease financial pressure on households but also stimulate investment and economic activity.
Acting Government Spokesperson Nomonde Mnukwa said the policy shift would provide relief to many South Africans struggling with rising living costs.
“The move provides much-needed relief for South African households facing financial pressure due to the rising costs of living,” Mnukwa said.
She added that government-led reforms aimed at improving the business environment and supporting growth would continue in tandem with the central bank’s efforts.
“The decision reaffirms the soundness of South Africa’s monetary policy framework and the importance of coordinated efforts to support inclusive growth,” Mnukwa explained.
