{"id":833697,"date":"2025-07-31T15:19:34","date_gmt":"2025-07-31T13:19:34","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=833697"},"modified":"2025-07-31T15:30:17","modified_gmt":"2025-07-31T13:30:17","slug":"reserve-bank-cuts-interest-rates-and-aims-for-new-target","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/833697\/reserve-bank-cuts-interest-rates-and-aims-for-new-target\/","title":{"rendered":"Reserve Bank cuts interest rates"},"content":{"rendered":"\n

The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) has voted to cut interest rates in South Africa by another 25 basis points.<\/p>\n\n\n\n

This brings the repo rate down to 7.00% and the prime lending rate to 10.50%.<\/p>\n\n\n\n

The decision was in line with economists’ and analysts’ views ahead of the meeting, where opinions were tilted towards a small cut.<\/p>\n\n\n\n

While some had anticipated a hold on rates, given the imminent application of a 30% tariff on exports to the United States from Friday, 1 August, the MPC followed through with a cut.<\/p>\n\n\n\n

Notably, the vote was unanimous.<\/p>\n\n\n\n

Reserve Bank governor Lesetja Kganyago said that the global economic conditions remain uncertain amid the United States\u2019 tariff push, while local conditions in South Africa remain under pressure.<\/p>\n\n\n\n

He said the bank had warned that economic data in South Africa was weak, and this reflected in the GDP data that was published by Stats SA, including a downward revision to 2024\u2019s growth.<\/p>\n\n\n\n

However, more recent data has pointed to more positive growth, suggesting that the economy picked up in the second quarter of the year.<\/p>\n\n\n\n

Nevertheless, the economy\u2019s underlying growth trend remains low, mainly due to persistent supply-side problems, for instance in logistics.<\/p>\n\n\n\n

Higher levels of uncertainty also affect output, with business and consumer confidence deteriorating in the first half of the year.<\/p>\n\n\n\n

Inflation has remained low, but expectations have moderated, with the expectation that headline inflation will rise over the next few months, averaging 3.3% for the year.<\/p>\n\n\n\n

It\u2019s against this backdrop that the committee voted to cut rates by 25 points.<\/p>\n\n\n\n

New inflation target<\/h2>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n

As with previous meetings, the MPC considered a new inflation scenario with a 3% target in its modelling.<\/p>\n\n\n\n

Kganyago reiterated the SARB’s position that the existing 3%-6% target is too high and too wide, and should be reformed.<\/p>\n\n\n\n

“With actual inflation close to 3%, we wanted to highlight the opportunity to achieve permanently lower inflation at minimal cost,” he said.<\/p>\n\n\n\n

Using a 3% target model, the bank saw a near-term rise in headline inflation. However, core inflation remained the same.<\/p>\n\n\n\n

“With a 3% objective, core inflation stays roughly where it is currently, which is close to 3%. Expectations settle around a \u2018new normal\u2019 of 3% during 2027, as stakeholders observe lower inflation and learn about the new target,” he said.<\/p>\n\n\n\n

The governor noted that, in the model, inflation also benefits from a somewhat stronger rand.<\/p>\n\n\n\n

In the alternative forecast with the 4.5% objective, by contrast, there is no learning, and the exchange rate is more depreciated, so inflation reverts to 4.5% instead.<\/p>\n\n\n\n

Given this data, the governor said that the MPC prefers now for inflation to settle at 3%, and will aim for the bottom of the 3%-6% target range.<\/p>\n\n\n\n

“We will use forecasts with a 3% inflation anchor at future meetings,” he said.<\/p>\n\n\n\n

The SARB has been consulting with the National Treasury\u2014which sets the target\u2014to reform the policy.<\/p>\n\n\n\n

“The South African Reserve Bank will continue working with the National Treasury to complete target reform and achieve permanently low inflation,” Kganyago said.<\/p>\n","protected":false},"excerpt":{"rendered":"

The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) has voted to cut interest rates in South Africa by another 25 basis points.<\/p>\n","protected":false},"author":10,"featured_media":828563,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[10315,2924],"class_list":["post-833697","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-interest-rate","tag-reserve-bank"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/833697","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=833697"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/833697\/revisions"}],"predecessor-version":[{"id":833701,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/833697\/revisions\/833701"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/828563"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=833697"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=833697"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=833697"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}