JOHANNESBURG, May 29 (Xinhua) -- South Africa's central bank cut its benchmark repo rate by 25 basis points to 7.25 percent on Thursday, citing subdued inflation and slowing growth, while lowering its forecasts for both gross domestic product and consumer prices amid global economic uncertainty.
South African Reserve Bank (SARB) Governor Lesetja Kganyago announced the decision during a virtual press conference, saying that five members of the bank's Monetary Policy Committee (MPC) voted for the cut, while one preferred a deeper 50-basis-point reduction. The new rate takes effect on Friday.
The central bank now expects economic growth of 1.2 percent in 2025, below the National Treasury's projection of 1.4 percent in its revised 2025 budget, Kganyago said.
Global economic conditions are volatile given the tariffs imposed by the United States and the combination of higher trade barriers and elevated uncertainty are likely to weigh on the global economy, he said, noting that while the outlook for domestic structural reforms remains positive, external headwinds such as slower global growth continue to pose risks.
Inflation fell below 3 percent in April, and core inflation remains near the lower end of the bank's 3 to 6 percent target range, Kganyago said. "Looking forward, we have revised down our inflation forecasts. This reflects the lower starting point, as well as a stronger exchange rate assumption and lower world oil prices," he said.
Mamello Matikinca-Ngwenya, chief economist at South Africa's First National Bank (FNB), said the lower inflation influenced the central bank to cut the repo rate.
"The MPC's decision to cut interest rates highlights a greater focus on domestic fundamentals. Inflation remains below the bottom of the inflation target range and high-frequency data reflects a weak start to 2025 from a productive sector point of view, which will be worsened by faltering global prospects," she noted. "Ultimately, the macroeconomic outlook is benign, providing ample space for a continued cutting cycle."
FNB Chief Executive Officer Harry Kellan said the move would be welcomed by households and businesses, adding that another repo rate cut is likely this year.
