The South African Reserve Bank has lowered its benchmark interest rate by 25 basis points to 7.75%, following a decline in inflation.
The South African Reserve Bank, cautious amid mixed data and global uncertainty, has lowered its benchmark interest rate by 25 basis points to 7.75%.
This move comes after inflation fell to 2.8% in October, the lowest level since June 2020 during the Covid-19 pandemic.
South African Reserve Bank Governor Lesetja Kganyago stated that inflation appears to be under control in the near term. However, the situation remains “highly uncertain” in the medium term, considering the potential for higher costs in food, electricity, water, insurance premiums, and wage agreements.
Structural Reforms
Kganyago noted that while recent manufacturing data was weak, mining remains strong, and unemployment dropped to 32.1% in the third quarter, from 33.5% in the previous quarter.
He stated that South Africa’s economic growth could be higher starting next year, given ongoing structural reforms, including in electricity and transportation networks.
“25 basis points is a cautious level, as the environment is uncertain and requires caution,” he said. “Global interest rates could rise again, and the recent depreciation of the rand demonstrates how quickly global changes can affect South Africa.”
Uncertainty Over Policies
Kganyago mentioned that inflation in the US and UK has been higher than expected. Another concern is the uncertainty surrounding the policies that will be adopted by Donald Trump’s new government.
“There is a general increase in protectionism worldwide, and there are concerns that the protectionism we are seeing could affect global trade. Global trade is the lifeblood of the global economy,” he said.
