The South African Reserve Bank (SARB) Monetary Policy Committee has voted to cut South Africa’s interest rates by 25 basis points.<\/p>\n\n\n\n
This takes the repo rate to 6.75% and the prime lending rate to 10.25%. The decision was unanimous.<\/p>\n\n\n\n
Reserve Bank governor Lesetja Kganyago said that while inflation has ticked higher, it is due to non-core items and temporary shocks, like in the red meat market.<\/p>\n\n\n\n
“We continue to see this pressure as temporary, with inflation heading lower again from the beginning of next year. Indeed, recent outcomes have undershot our forecasts slightly,” he said.<\/p>\n\n\n\n
Stats SA published inflation data for October this week, recording CPI at 3.6%. This was higher than the 3.4% recorded in September, but lower than market expectations of 3.7%.<\/p>\n\n\n\n
Inflation has come in lower than market expectations for the past three months, with August even surprising by cooling rather than heating up as expected.<\/p>\n\n\n\n
“Because of these downside surprises, together with a stronger rand, and a lower oil price assumption, we have small downward revisions to our inflation outlook, for both 2025 and 2026,” Kganyago said.<\/p>\n\n\n\n
“We remain on track to deliver 3% inflation over the medium term.”<\/p>\n\n\n\n
For inflation expectations, the governor said that market rates and surveys of analysts both show further progress towards the formally-adopted 3% objective. <\/p>\n\n\n\n
Core goods prices are benefiting from exchange rate strength, and food price inflation seems to have peaked, Kganyago said.<\/p>\n\n\n\n
“Services inflation is unchanged from the last meeting. Announced medical aid increases are lower than last year\u2019s; at the same time, housing inflation has accelerated, which warrants ongoing scrutiny,” he said.<\/p>\n\n\n\n
Against this backdrop, the MPC decided to reduce the policy rate by 25 basis points, to 6.75%, with effect from 20 November.<\/p>\n\n\n\n
“Members agreed there was scope now to make the policy stance less restrictive, in the context of an improved inflation outlook,” Kganyago said.<\/p>\n\n\n\n
Looking ahead, the central bank noted that its Quarterly Projection Model continues to forecast gradual rate cuts as inflation subsides. <\/p>\n\n\n\n
However, as is always the case, this rate path remains a broad policy guide. <\/p>\n\n\n\n
“Our decisions will continue to be taken on a meeting-by-meeting basis, with careful attention to the outlook, data outcomes, and the balance of risks to the forecast,” Kganyago said.<\/p>\n\n\n\n
The decision to cut rates was generally in line with market expectations, where economists and analysts were split between calling a cut or a hold.<\/p>\n\n\n\n
A cut was seen by stakeholders who viewed the balance of economic indicators as being more favourable, with little inflation pressure and restrictive rates putting a damper on economic growth.<\/p>\n\n\n\n
Those who anticipated a hold viewed the SARB MPC as being more hawkish and cautious to undermine the newly-adopted 3% inflation target.<\/p>\n\n\n\n
Ultimately, the doves won the debate.<\/p>\n\n\n\n
The November meeting marks the final rates decision for the year, with the MPC expected to meet again in January 2026.<\/p>\n","protected":false},"excerpt":{"rendered":"
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