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.<\/p>\n\n\n\n
This takes the repo rate 7.75%, and the prime lending rate to 11.25%. The decision to cut rates was unanimous.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
Despite this, economists predicted that the MPC would take a cautious approach, given the riskier global economic environment.<\/p>\n\n\n\n
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. <\/p>\n\n\n\n
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.<\/p>\n\n\n\n
“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.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
This is largely because of a hefty electricity price hike being factored in.<\/p>\n\n\n\n
“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.<\/p>\n\n\n\n
Against this backdrop, the MPC decided to reduce the policy rate by 25 basis points, to 7.75%, with effect from 22 November 2024.<\/p>\n\n\n\n
More cuts to come<\/strong><\/p>\n\n\n\n Regarding future rate hikes, Kganyago said that the risk outlook requires a cautious approach.<\/p>\n\n\n\n “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.<\/p>\n\n\n\n Regardless, the forecast sees rates easing further in future<\/strong>, stabilising a bit above 7%. This would mean room for another 50 basis points of cuts<\/strong>.<\/p>\n\n\n\n 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. <\/p>\n\n\n\n “Such decisions will continue to be outlook dependent, responsive to data developments, and sensitive to the balance of risks to the forecast,” he said.<\/p>\n\n\n\n “There are scenarios where inflation is higher than in our baseline. During the meeting, the MPC explored two such risk cases.<\/p>\n\n\n\n “One assumed higher administered price inflation. The other envisioned a more difficult external environment, with a weaker rand and higher oil prices.<\/p>\n\n\n\n “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.<\/p>\n\n\n\n Kganyago said that, given the challenging external environment, South Africa should work to sustain domestic reforms.<\/p>\n\n\n\n “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.”<\/p>\n\n\n\n
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