Reserve Bank MPC deals repo rate another cut

The South African Reserve Bank’s monetary policy committee decided unanimously to cut the repo rate by 25 basis points to 7.75% on Thursday.

Reserve Bank governor Lesetja Kganyago said while conditions improved considerably for South Africa’s outlook, the global economic context became more challenging with new inflation pressures which suggested monetary policy space would diminish.

“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. The risk outlook, however, requires a cautious approach,” Kganyago said.

The announcement comes after Stats SA announced on Wednesday consumer price inflation (CPI) cooled for the fifth consecutive month in October.

Inflation eased from 3.8% in September to 2.8% in October, receding to the lowest inflation print point since 2020 in June, when CPI was 2.2%.

The governor said South Africa’s economic growth is taking shape and these outputs will benefit from tailwinds including lower inflation, higher incomes and more spending thanks to the two-pot pension fund system.

Mixed data flow including subdued manufacturing data, stronger mining data and the labour force survey started showing positive trends. He said the medium-term improvement in growth as reforms gain traction was expected to be 2% by 2027.

Kganyago added the MPC’s forecast sees rates easing further in future, stabilising a bit above 7%, but the MPC emphasised its decisions will be made on a meeting by meeting basis with consideration for data and the balance of risks.

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