In a much-anticipated move, the South African Reserve Bank (SARB) Governor Lesetja Kganyago announced on Thursday a reduction in the repo rate by 25 basis points, bringing it down from 7.50% to 7.25%. This decision marks a targeted attempt to provide relief to borrowers as the country confronts persistent economic challenges, including sluggish growth and heightened unemployment rates.
The Monetary Policy Committee (MPC) made the decision unanimously, although one member expressed a desire for a more substantial cut of 0.5%. Kganyago underscored the bank’s cautious approach, stating, “The outlook for structural reforms remains positive, but there are also headwinds like lower global growth.”
As part of the announcement, Kganyago revised the SARB’s Gross Domestic Product (GDP) forecasts. The bank now predicts economic growth of just 1.2% for the year 2023, with a modest increase to 1.8% by 2027. This adjustment reflects the ongoing challenges faced by the South African economy, which has been grappling with low growth rates and significant unemployment.
Despite the economic gloom, inflation figures have remained relatively stable, with the SARB recording less than 3% in April and core inflation maintaining at 3%, comfortably situated at the lower end of the SARB’s target range. This stability may play a critical role in aiding monetary policy decisions moving forward and provide a silver lining for the central bank in the current turbulent economic landscape.