South Africa on Thursday cut its benchmark interest rate by 25 basis points, marking the first policy move since the country adopted a new inflation-targeting framework.
South Africa’s government has welcomed the Reserve Bank’s decision to lower the repo rate to 6.75%, with the prime lending rate now at 10.25%, after the Monetary Policy Committee (MPC) voted unanimously for the cut.
The announcement follows the country’s shift from a 3–6% inflation target range to a 3% target with a ±1 percentage point tolerance band. Acting government spokesperson Nomonde Mnukwa said the rate reduction would bring relief to indebted consumers, support small businesses, and stimulate investment.
“Government continues to prioritise measures that help reduce the cost of living, create jobs, and improve economic activity,” Mnukwa said, adding that the move aligns with efforts to strengthen growth and support vulnerable households.
Global turbulence, easing domestic pressures
Delivering the MPC statement, Reserve Bank Governor Lesetja Kganyago said global conditions remained volatile. “It has been a turbulent year for the global economy. Trade patterns are shifting, but global growth is holding up better than expected,” he noted.
Kganyago said inflation had eased in the euro area but remained challenging in several major economies. “There is deflation risk in China, and inflation remains materially above 2% targets in the United Kingdom, Japan, and the US. This is in contrast with emerging markets where inflation has eased,” he said.
At home, inflation rose to 3.6% in October from an average of 3% earlier in the year. “This uptick is attributed to non-core items, which include meat, vegetables, and fuels,” the Governor said.
Still, the MPC expects the pressure to be temporary, forecasting declines early next year. “Because of the downside surprises together with a stronger rand, and lower price assumptions, we have small downward revisions to our inflation outlook for both 2025 and 2026,” Kganyago added.
Core goods prices are benefiting from the firmer rand, while food inflation is believed to have peaked, though officials expect a slight upward revision driven by beef prices. Housing inflation has accelerated, prompting what the Governor called “ongoing scrutiny”.
Unanimous vote and reform momentum
“Against this backdrop, the MPC decided to reduce the policy rate by 25 basis points, to 6.75%, with effect from 21 November,” Kganyago announced, emphasising that the vote was unanimous.
“Members agreed there was scope now to make the policy stance less restrictive, in the context of an improved inflation outlook,” he said.
Kganyago stressed the importance of continuing structural and macroeconomic reforms to sustain growth and reduce debt vulnerabilities. He highlighted progress made this year, including a credit rating upgrade from Standard & Poor’s and South Africa’s removal from the Financial Action Task Force grey list.
“The global environment nonetheless remains challenging, so it is urgent to sustain domestic reform efforts,” he warned.
The government said the rate cut would help reinforce its push for inclusive economic growth as the country navigates a fragile global landscape.
