PRETORIA - The South African Reserve Bank (SARB) has announced a reduction in the repurchase rate by 25 basis points to 7.75%, effective from November 22, 2024, as conveyed in a statement by the Governor, Lesetja Kganyago. This decision, taken unanimously by the Monetary Policy Committee (MPC), comes amidst a complex global economic landscape characterized by a stronger dollar, rising interest rates, and new inflationary pressures.
The MPC noted that South Africa's growth recovery is gaining traction, with positive indicators such as a decrease in unemployment and a potential boost from the newly implemented Two-Pot pension system. Despite mixed data outcomes and subdued manufacturing figures, the mining sector showed strength and job gains were broad-based. The Committee forecasts growth to reach 2% by 2027.
Consumer price inflation in South Africa has dipped below the target range, registering at 2.8% in October. This is attributed to a stronger exchange rate and lower oil prices compared to the previous year. Inflation is expected to remain below 4% until mid-2025, with a modest increase projected thereafter due to higher electricity prices.
The MPC anticipates that inflation expectations will moderate further, aligning closer to the midpoint objective over the forecast horizon. The risks to the inflation outlook are considered balanced, with potential medium-term uncertainties such as higher food, electricity, water, insurance premiums, and wage settlements.
The committee's decision to lower the policy rate aligns with the goal of achieving the inflation target while maintaining a cautious approach due to the unpredictable global interest rates and the recent depreciation of the rand. Although further easing of rates is forecasted, the MPC emphasizes that future decisions will be made on a case-by-case basis, responsive to data developments and sensitive to the balance of risks.
The SARB's commitment to delivering low and stable inflation, coupled with structural reforms aimed at supporting growth capacity and rebuilding fiscal and monetary policy space, remains pivotal in the face of external challenges. The MPC also acknowledged recent positive credit rating outlooks and the potential for structural reforms to bolster long-term growth prospects.
This announcement follows similar rate cuts by the European Central Bank in October, and by the Bank of England and the US Federal Reserve in November. The MPC's decision is based on a press release statement, which provides insight into the economic conditions and policy considerations guiding the bank's actions.
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