Reserve Bank cuts South African interest rates to lowest level since 2023




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At its January meeting, the Reserve Bank’s Monetary Policy Committee (MPC) cut South Africa’s interest rates by 25 basis points, bringing the repo rate to a level last seen in 2023.

On Thursday, 30 January 2024, SARB Governor Lesetja Kganyago announced that the MPC opted to cut the country’s interest rates by 25 basis points, with effect from 31 January 2025.

The decision was not unanimous, with four members of the MPC voting to cut rates by 25 points, while the other two preferred an unchanged stance. 

“The committee ultimately agreed that it was possible to reduce the degree of policy restrictiveness, making the stance somewhat more neutral,” Kganyago said.

“However, all members were concerned about the uncertain global outlook.”

This decision brings the repo rate down to 7.50% and the prime lending rate to 11.00%.

This is the third cut the MPC has implemented in the current cycle, which started in September last year with a 25 basis point cut. Including the cut from November, the MPC has now cut rates by a cumulative 75 basis points.

While this will bring significant relief to South African households, it is still a far cry from the 475 basis points the MPC has hiked rates by over the past three years.

In 2021, South Africa’s interest rates were at their lowest level in years, as the MPC had lowered rates to provide relief to struggling households during the Covid-19 pandemic.

However, the MPC noticed significant upside risks to the inflation outlook and started hiking rates in November 2021 to tame inflation.

Their efforts saw the repo rate skyrocket from 3.50% in November 2021 to 8.25% in May 2024.

These hikes allowed inflation to fall within the Reserve Bank’s target range of 3% to 6% and even dip lower than 3% at the end of 2024.

Therefore, the MPC opted to cut rates for the first time in years at its September 2024 meeting and again at its November meeting.

The January cut was in line with most expert predictions, who projected that the SARB would cut by 25 basis points.

However, experts have also warned that the January cut may be the last cut South Africa sees for some time, as the SARB remains highly cautious and monetary policy continues to be restrictive.

Kganyago said the MPC’s forecast sees rates drifting slightly lower over the next few years, stabilising near 7.25%.

However, he emphasised that the committee’s decisions will be made on a meeting-by-meeting basis, with no forward guidance and no pre-commitment to any specific rate path.

“Such decisions will continue to be outlook dependent, responsive to data developments, and sensitive to the balance of risks to the forecast,” he said.

The governor also warned that risks to the inflation outlook are assessed to the upside.

“In the near term, inflation appears well contained. However, the medium-term outlook is more uncertain than usual, with material risks from the external environment,” he explained.

“Domestic factors such as administered prices are also problematic.”