Pretoria: The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) has announced a reduction in the repo rate by 25 basis points, bringing it down to 6.75%. This change will take effect from 20 November 2025. SARB Governor Lesetja Kganyago revealed that the decision was made unanimously by the committee members.
According to South African Government News Agency, Governor Kganyago stated that the decision was influenced by an improved inflation outlook and balanced growth risks. Inflation recently increased to 3.6% in October, up from a 3% average earlier in the year, primarily due to non-core items such as meat, vegetables, and fuel. However, this inflationary pressure is expected to be temporary, and forecasts suggest a decrease in inflation at the start of next year.
The inflation outlook for both 2025 and 2026 has been slightly revised downward due to a stronger rand and lower oil price assumptions. Although there is no update from the usual survey on inflation expectations, market rates and analyst surveys indicate a move towards the 3% inflation objective. While food price inflation seems to have peaked, services inflation remains unchanged from the previous meeting.
The MPC evaluated the inflation risks as balanced, with the Quarterly Projection Model suggesting gradual rate cuts as inflation decreases. Governor Kganyago emphasized that future rate decisions will be based on meeting-to-meeting assessments of the economic outlook and associated risks. Despite positive domestic growth indicators and rising household consumption, investment remains an area of concern.
During this meeting, the MPC considered two risk scenarios: one involving a potential US dollar rebound that could impact the rand's value, and another concerning higher administered prices linked to correcting a previously disclosed electricity pricing error. Both scenarios indicated that monetary policy could become tighter, causing rates to decrease more slowly than in the baseline scenario.
Previously, in September, the central bank had kept the repo rate unchanged at 10.5%. The recent Medium Term Budget Policy Statement introduced a new inflation target of 3% with a 1 percentage point tolerance band, replacing the previous target range of 3% to 6%. This new target will be implemented over the next two years, following consultations between the Governor, the Minister of Finance Enoch Godongwana, the President, and the Cabinet.