BREAKING NEWS: SARB Cuts Interest Rates By 25 Basis Points - Prime Lending Rate Now 10.75%
As expected by most economists, the South African Reserve Bank's monetary policy committee (MPC) lowered the repo rate by 25 basis points to 7.25% - a level last seen in January 2023.
Five MPC members opted for the cut, while one member wanted a 50-basis-point cut.
Governor Lesetja Kganyago said underlying inflation was well contained, with conditions more settled than during its last meeting in March.
The prime rate is now 10.75%. On a new home loan of R2 million, the rate cut will lower monthly payments by around R350.
The latest decision comes amid a push - spearheaded by Kganyago - to lower the inflation target. This would mean stricter monetary policy, and could inhibit interest rate cuts.
The inflation target is currently a band of 3% to 6%, with 4.5% seen as the sweet spot. Kganyago said the MPC believed a 3% target was "more attractive than the 4.5% baseline".
But thanks in part to lower fuel prices, consumer inflation has been below 4.5% for nine consecutive months, and it is currently sitting at 2.8% (for April).
However, an increase in the fuel levy (announced in the latest Budget) and higher meat prices may cause inflation to tick higher.