The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) has decided to cut the repo rate by 25 basis points.
The repo rate now sits at 7.75% while the prime lending rate will now be 11.25%.
The announcement was made by SARB Governor, Lesetja Kganyago, in Pretoria, following the last meeting of the MPC this year.
“The MPC decided to reduce the policy rate by 25 basis points, to 7.75%, with effect from November 22.
The decision was unanimous.
The committee agreed that reducing the level of policy restrictiveness is still consistent with achieving the inflation target,” said Kganyago.
The MPC’s decision comes a day after Stats SA announced that the consumer price inflation eased from 3.8% in September, to 2.8% in October.
“Despite this, Kganyago warned that the risk outlook, however, requires a cautious approach, as 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.
“The forecast sees rates easing further in future, stabilising a bit above 7%.
But this rate path from the Quarterly Projection Model remains a broad policy guide.
The MPC would like to emphasise that its decisions will be made 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,” explained Kganyago.
In addition, the Governor said economic growth recovery continues after a weak economic performance through 2023 and the first half of 2024.
He highlighted that in the short term, the SARB expect this output to benefit from a variety of tailwinds, including lower inflation, higher disposable income and extra spending from pension withdrawals via the new two-pot retirement system.
“It is unclear how much this will boost the third-quarter growth numbers, which are due in a few weeks.
The data flow has been mixed lately, with some indicators disappointing, while others have been positive.
“For instance, recent manufacturing data was subdued, but mining was stronger.
Encouragingly, the most recent labour force survey showed relatively large and broad-based job gains and lower unemployment,” said the Governor.
The bank’s forecast now extends out to 2027, and it forecast growth reaching 2% in that year, boosted by new reforms.
Kganyago highlighted that the risks to the growth outlook are assessed to be balanced.
“Given mixed data outcomes, it is possible that near-term growth could fall short of current projections.
At the same time, growth could be higher from next year, given ongoing reforms.
These include structural reforms, especially in the network sectors, such as electricity and transport.
Furthermore, the recent positive outlook on South Africa’s credit rating, from Standard & Poor’s, points to an improving country risk premium.
These factors suggest upside risks to the longer-term growth forecast,” said Kganyago.
