Reserve Bank cuts interest rates by another 25 basis points

The South African Reserve Bank (SARB) has announced another rate cut for South Africa, with the Monetary Policy Committee (MPC) voting to cut rates by 25 basis points.

This takes the repo rate 7.75%, and the prime lending rate to 11.25%. The decision to cut rates was unanimous.

The rate cuts were in line with market expectations, though some had hoped for a bigger 50 basis point cut, given the significant easing of headline inflation in the country.

Stats SA announced that CPI for October had dropped outside the SARB’s target range of 3% to 6%, hitting 2.8% for the month.

Despite this, economists predicted that the MPC would take a cautious approach, given the riskier global economic environment.

According to Kganyago, while the risks are seen as balanced, he did warn that, given mixed data outcomes, it is possible that near-term growth could fall short of current projections.

However, there are still many positives for the country, including lower inflation, as well as more positive sentiment on the country and its credit rating.

“Growth could be higher from next year, given ongoing reforms. These include structural reforms, especially in the network sectors, such as electricity and transport,” he said.

Looking at inflation specifically, he said the MPC has raised its inflation expectations versus September, now at 4.6% at the end of 2025, versus 4.4% predicted two months ago.

This is largely because of a hefty electricity price hike being factored in.

“We continue to see headline inflation stabilising near our midpoint objective over the forecast horizon. In this context, we anticipate inflation expectations will moderate further,” he said.

Against this backdrop, the MPC decided to reduce the policy rate by 25 basis points, to 7.75%, with effect from 22 November 2024.

More cuts to come

Regarding future rate hikes, Kganyago said that the risk outlook requires a cautious approach.

“Global interest rates could well shift higher again, and the recent rand depreciation demonstrates how rapidly changes in the global environment can affect South Africa,” he said.

Regardless, the forecast sees rates easing further in future, stabilising a bit above 7%. This would mean room for another 50 basis points of cuts.

However, the Reserve Bank governor said this rate path remains a broad policy guide, with the MPC itself voting 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.

“There are scenarios where inflation is higher than in our baseline. During the meeting, the MPC explored two such risk cases.

“One assumed higher administered price inflation. The other envisioned a more difficult external environment, with a weaker rand and higher oil prices.

“We also considered a favourable scenario where geopolitical tensions subside, and the oil price fall. These scenarios underscored the uncertainty surrounding the outlook,” he said.

Kganyago said that, given the challenging external environment, South Africa should work to sustain domestic reforms.

“Additional measures that would improve economic conditions include reaching a prudent public debt level, further repairing and strengthening network industries, lowering administered price inflation, and keeping real wage growth in line with productivity gains.”

Read: Hopes dashed for bigger interest rate cut in South Africa