South Africa’s Reserve Bank on Thursday cut its benchmark lending (repo) rate by 25 basis points to 6.75%, the lowest level since October 2022, despite the recent rise in inflation.
The decision, which was widely expected, marks the sixth rate cut in the current easing cycle and brings the prime lending rate down to 10.25%.
“Members agreed there was scope now to make the policy stance less restrictive, in the context of an improved inflation outlook,” said Lesetja Kganyago, Reserve Bank Governor at the Monetary Policy Committee’s last meeting for the year.
Africa’s most industrialised economy is among several across the continent easing monetary policy this year. Last week, Zambia cut its key lending rate for the first time in more than five years, while Nigeria, Ghana, Egypt, and Kenya have also lowered rates as inflation moderates across many markets.
The committee’s move followed the release of October inflation data showing that consumer prices rose for a second straight month, reaching 3.6% from 3.4% in September. The print came in slightly below analysts’ expectations but remains within the Bank’s revised inflation target of 3%, with a tolerance band of 2–4%.
The rate cut also follows a hold decision in September and another 25-basis-point reduction in July. In total, the Bank has cut 150 basis points since September 2024, partially unwinding the aggressive 475-basis-point hiking cycle that pushed interest rates to 15-year highs.
Roughly 70% of economists had predicted a 25-basis-point cut, especially after Enoch Godongwana, the country’s Finance Minister, announced the new inflation target—seen as helping align fiscal and monetary authorities.
Kganyago said the MPC views risks to the inflation outlook as “balanced” and highlighted that the Bank’s Quarterly Projection Model still sees room for further gradual easing.
“As before, this rate path remains a broad policy guide. Our decisions will continue to be taken on a meeting-by-meeting basis, with careful attention to the outlook, data outcomes, and the balance of risks to the forecast,” he added.
South Africa’s economic momentum weakens as PMI slips
Latest S&P Global Purchasing Managers Index data show that business activity weakened in October, with the PMI falling to 48.8 from 50.2 in September—signalling renewed contraction after seven consecutive months of expansion.
Softer domestic demand drove declines in output and sales, even as supplier delivery times improved and cost pressures eased.
Meanwhile, the unemployment rate fell for the first time this year, offering rare relief in the country’s long-running job crisis. Joblessness declined to 31.9%in the third quarter from 33.2% in Q2—its lowest level since late 2024—despite concerns that the US’s new 30% tariff could hinder industrial output.
Statistics SA said the improvement was driven by gains in construction, social services, and trade. The number of unemployed people fell by 360,000 to 8.1 million, while employment rose by 248,000 to 17.1 million. The labour force slightly decreased by 112,000 to 25.1 million.
