South African Reserve Bank Cuts Repo Rate Amid Slowing Growth and Easing Inflation

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The South African Reserve Bank (SARB) has lowered its benchmark repo rate by 25 basis points to 7.25%, effective Friday, in response to weakening economic growth and subdued inflation. The move, announced by Governor Lesetja Kganyago in a virtual press briefing on Thursday, followed a majority vote by the Monetary Policy Committee (MPC), with five members supporting the cut and one advocating for a more aggressive 50 basis point reduction.

This marks a shift in the central bank’s monetary approach, highlighting a stronger focus on domestic economic conditions in the face of ongoing global uncertainty. SARB has revised its 2025 GDP growth forecast down to 1.2%, falling short of the National Treasury’s 1.4% projection released in February.

Governor Kganyago pointed to mounting international challenges, including new U.S. trade tariffs and rising global protectionism, as key risks impacting both global and local economic momentum.

The bank also revised its inflation forecast downward. Statistics South Africa reported that headline inflation dropped below 3% in April, the lower end of SARB’s 3–6% target range. Core inflation, which excludes volatile food and energy prices, has also remained restrained. The revised inflation outlook is attributed to a stronger rand and lower international oil prices.

“The update reflects a lower baseline and revised assumptions, such as a firmer currency and softer global oil markets,” Kganyago explained.

Mamello Matikinca-Ngwenya, Chief Economist at First National Bank, welcomed the move, noting it reflects the SARB’s pivot toward addressing domestic economic headwinds. “With inflation well-anchored and key sectors showing signs of early-year weakness, there is room for policy support,” she said. She also warned that weaker global demand may intensify existing structural challenges, supporting the case for further easing.

FNB CEO Harry Kellan also endorsed the decision, citing its potential to boost consumer and business confidence. He indicated that more cuts could follow if inflation remains tame and global conditions stay favorable.

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The rate cut comes at a critical time, as South Africa contends with sluggish productivity, energy supply issues, and geopolitical instability. Nonetheless, Kganyago reaffirmed SARB’s commitment to price stability and sustainable growth, stating that future decisions will remain guided by data and emerging risks.

With room for further monetary easing now evident, attention will turn to upcoming economic data to assess the outlook for inflation and growth through the remainder of 2025.