Zuko Komisa
The South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) has voted to cut the repo rate by 25 basis points, effective January 31, 2025.The SARB also expects GDP growth to reach 2.0% by 2027, despite poor mining and manufacturing sectors that remain below Covid-19 levels.
In South Africa, the outlook for US Monetary Policy rate decreases appears limited in the face of escalating trade barriers.
Reserve Bank Governor Lesetja Kganyago noted that the US Federal Reserve may even raise interest rates to combat inflation.
“Four members preferred this action, while two supported an unchanged stance. The committee ultimately agreed that it was possible to reduce the degree of policy restrictiveness, making the stance somewhat more neutral. However, all members were concerned about the uncertain global outlook,” SARB Governor Lesetja Kganyago said on Thursday.
The MPC reduced the repurchase rate by 25 basis points to 7.5%. While South Africa’s inflation forecast has improved, the balance of risks is assessed to the upside. #SARBMPCJAN25 #InterestRates pic.twitter.com/VGiwM3KgIy
— SA Reserve Bank (@SAReserveBank) January 30, 2025
On Inflation
“Inflation slowed to 3% in December, having started the year above 5%. This was mainly due to favourable goods-price developments, including food inflation reaching 15-year lows, as well as lower fuel costs.
“Because of these transitory factors, inflation is likely to remain in the bottom half of our target range through the first half of this year. But headline inflation should revert to around 4.5% thereafter, aided by core inflation which remains at or below the midpoint over the forecast horizon,”
“The risks to the inflation outlook are assessed to the upside. In the near term, inflation appears well contained. However, the medium-term outlook is more uncertain than usual, with material risks from the external environment. Domestic factors such as administered prices are also problematic,” Kganyago said
The Siz The World team took time to reflect on the interest rate cut by 25 basis points by South African Reserve Bank, as well as the 12% electricity tariff increase.
Listen to the full conversation here:
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