The SA Reserve Bank (SARB) has cut the repo rate by 50 basis points to five percent, governor Gill Marcus said on Thursday.
The prime rate would decline to 8.5 percent.
This follows nine consecutive Monetary Policy Committee meetings where the repo rate remained unchanged at 5.5 percent, after it was reduced by 650 basis points between mid-2008 and November 2010.
The SARB determines the interest rate based on its mandate to keep inflation within a target of between three and six percent.
Consumer price inflation was 5.5 percent for June while producer price inflation was 6.6 percent in May.