South Africa's Central Bank Cuts Repo Rate by 25 Basis Points

This marks the second repurchase rate cut by the central bank this year.

SARB Governor Lesetja Kganyago said that the South African economy is gradually recovering from the stagnation it experienced last year, and the rate cut decision was unanimous.

"We continue to see a growth recovery taking hold after a weak economic performance through 2023 and the first half of 2024," Kganyago said.

He said that the country's economic recovery is being supported by declining inflation, which has dropped to 2.8 percent, its lowest level since June 2020, according to the latest data.

"Over the medium term, we still expect a sustained improvement in growth as reforms take effect. Our forecast now extends to 2027, with growth expected to reach 2 percent in that year. The risks to the growth outlook are assessed to be balanced," he said.

On inflation, Kganyago said that the prices of goods have slowed more significantly than those of services, driven primarily by a stronger exchange rate and lower oil prices compared to last year.

"The risks to the inflation outlook are assessed as balanced. In the near term, inflation appears well-contained. However, the medium-term outlook is highly uncertain, with material upside risks including higher prices for food, electricity, water, insurance, and wage settlements," he said.

Kganyago also noted that while forecasts suggest the repurchase rate may ease slightly above 7 percent in the future, the Quarterly Projection Model serves only as a broad policy guide.

"The SARB emphasizes that its decisions will be made on a meeting-by-meeting basis, with no forward guidance or pre-commitment to any specific rate path. Such decisions will remain outlook-dependent, responsive to data developments, and sensitive to the balance of risks in the forecast," Kganyago added.

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