SARB drops repo rate by another 25 basis points

The repo rate now sits at 7.75 per cent, while the prime lending rate will be 11.25 per cent. 

The bank's Governor, Lesetja Kganyago, announced the unanimous decision following a meeting of the Monetary Policy Committee.

The announcement comes a day after Stats SA reported a decline in annual consumer price inflation, which dropped from 3.8% in September to 2.8% in October.

This is below SARB’s target range of 3% to 6%.  

Kganyago said the committee agreed that reducing the level of policy restrictiveness is still consistent with achieving the inflation target.

"The risk outlook, however, requires a cautious approach. 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.

“There are scenarios where inflation is higher than in our baseline. During the meeting, the MPC explored two such risk cases. One assumed higher administered price inflation. The other envisioned a more difficult external environment, with a weaker rand and higher oil prices," he said.

He added that the committee also considered a favourable scenario where geopolitical tensions subside, and the oil price falls.

"These scenarios underscored the uncertainty surrounding the outlook. Given a challenging external environment, it remains crucial to sustain domestic reform momentum. This entails both structural reforms to support growth capacity and macroeconomic efforts to rebuild fiscal and monetary policy space.

“The MPC’s main contribution is to deliver low and stable inflation with well-anchored inflation expectations.”

On the economic outlook, Kganyago said the central bank sees growth reaching 2% in 2027.

Given mixed data outcomes, 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.

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