The South African Reserve Bank (SARB), led by Governor Lesetja Kganyago, has cut the repo rate by 25 basis points, reducing it to 8%. The prime lending rate will also decrease to 11.50%. This decision comes after careful deliberation by the Monetary Policy Committee (MPC), which considered both a 25 and 50 basis point cut before opting for the more conservative 25 basis point reduction. This unanimous decision was influenced by the recent cooling in inflation, which fell to 4.4% in August, its lowest since April 2021 and below the SARB’s target of 4.5%.

The MPC’s decision follows similar actions by global central banks, including the US Federal Reserve, which recently reduced its federal funds rate by 50 basis points to 4.75%-5% on the back of improved inflation data. The easing of global inflation, a more stable US dollar, and reduced financial market volatility have contributed to more favourable global economic conditions.

Domestically, the SARB forecasts an improvement in economic growth, expecting 0.6% growth in both quarters of the second half of the year, supported by a stabilised electricity supply and potential increased consumer spending due to withdrawals from the Two-Pot retirement system. However, Governor Kganyago cautioned that while a “soft landing” seems more likely, financial and economic uncertainties persist. The SARB’s revised growth projections for the medium term reflect optimism about ongoing structural reforms, particularly in the energy sector.