South Africa Cuts Interest Rates by 25 Basis Points: Kganyago Highlights Uncertain Inflation Outlook

South Africa Cuts Interest Rates by 25 Basis Points

The South African Reserve Bank cut interest rates by 25 basis points at its final meeting of 2024. This decision was unanimous among the Monetary Policy Committee (MPC) members. Governor Lesetja Kganyago noted that the medium-term inflation outlook is uncertain.

The new rate reduces monthly payments for a R2 million home loan (at prime) by about R340. Currently, the repo rate stands at 7.75%. Despite inflation in South Africa being 2.8%, lower than the target range of 3% to 6%, the MPC opted for a cautious approach.

Inflation rates in other countries, such as the US, are lower, with their rates cut by 75 basis points this year. Kganyago pointed out that global conditions can quickly impact South Africa’s economy. The rand has weakened recently, which could increase local inflation, particularly for imports priced in dollars.

Kganyago also mentioned potential factors that could raise inflation, including food, electricity, and water prices. He indicated a possibility of further cuts in the repo rate, stabilizing above 7%. The Reserve Bank is actively discussing a lower inflation target range with the Treasury. The next MPC meeting is scheduled for January 30, 2025.

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