The cut, effective November 21, was a unanimous decision of the Monetary Policy Committee (MPC). Governor Lesetja Kganyago said global economic conditions remain turbulent, with major economies facing contrasting price pressures.
Inflation appears contained in the euro area, but remains above 2% targets in the United Kingdom, Japan and the United States, while China faces deflation risks. By contrast, emerging markets have experienced easing inflation, supported by stronger capital flows, a weaker dollar and favourable terms of trade.
Kganyago noted that SA’s economy has performed better than anticipated. Growth in the second quarter exceeded expectations, and indicators for the third quarter are broadly positive. The SARB has revised its 2025 growth forecast slightly higher to 1.3%, with expectations that growth will approach 2% over the forecast horizon. Employment has also continued to rise.
Household spending has remained resilient, buoyed by lower inflation and rates, withdrawals from Two-Pot pension savings and wealth effects.
However, investment has been weak, contracting in the first half of the year. The Bank expects a recovery in the second half, which it says would signal a return towards the country’s historic growth trend. Inflation accelerated to 3.6% in October, up from the 3% average in the first half of the year, mainly due to higher meat, vegetable and fuel prices.
The SARB views these pressures as temporary and has revised its inflation outlook for 2025 and 2026 slightly downward due to a stronger rand, lower oil price assumptions and recent outcomes undershooting forecasts.
The MPC assessed inflation risks as balanced. Two scenarios were considered: a US dollar rebound that would weaken the rand, and higher administered prices linked to correcting a $3.15 billion electricity pricing error. Both scenarios pointed to a slower rate of cuts.
Kganyago also highlighted the shift to a new inflation target of 3% plus or minus 1 percentage point, replacing the long-standing 3–6% range. He said the SARB remains committed to anchoring expectations at 3% and achieving the target over the medium-term horizon.
–ChannelAfrica–
