The South African Reserve Bank (SARB) has lowered the repo rate by 25 basis points, bringing it down from 7.00% to 6.75%. Governor Lesetja Kganyago announced the unanimous decision following Thursday’s Monetary Policy Committee (MPC) meeting, which took place against the backdrop of rising consumer inflation.

The cut means the country’s prime lending rate now drops to 10.25%. Kganyago said the committee felt conditions were suitable for a slightly less restrictive stance, supported by a stronger rand, lower oil price assumptions, and softer-than-expected inflation readings. SARB maintains it is still on track to reach its 3% medium-term inflation goal.

Kganyago noted that global economic conditions remain mixed: while the euro area has contained inflation, major economies such as the US, Japan, and the UK continue to face elevated prices, and China faces deflation risks. In contrast, emerging markets have seen inflation ease thanks to improved capital flows and a weaker dollar.

Domestically, South Africa’s growth outlook has brightened. Better-than-expected second-quarter data and positive third-quarter indicators prompted SARB to lift its 2025 growth forecast to 1.3%, with expectations of growth approaching 2% over the medium term. However, investment remained weak in the year’s first half, though a rebound is expected later in the year.

Ahead of the announcement, economists widely anticipated a 25-basis-point cut. Data from Stats SA earlier in the week showed headline inflation rising to 3.6% in October—its highest level since September 2024—driven mainly by transport, recreation and culture, alcohol and tobacco, and household-related costs. Despite the increase, the figure came in slightly below market expectations.

The rate decision comes shortly after Finance Minister Enoch Godongwana formally endorsed a 3% inflation target with a 1-percentage-point tolerance band, replacing the long-standing 3%–6% range. Kganyago stressed that SARB aims to anchor inflation at 3%, though temporary deviations are inevitable in a flexible inflation-targeting framework.

He also highlighted progress on economic reforms, citing South Africa’s recent credit rating upgrade and its removal from the FATF grey list. Still, he warned that global uncertainties make it crucial for the country to maintain momentum on domestic reforms.

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