Festive relief from rate cut

Last Thursday's 0.25 basis points cut in prime lending rates is the sixth since rates peaked at 11.75% in May 2023.

- Ciaran Ryan

The latest cut brings prime lending rates to 10.25% and appears to have caught some analysts by surprise.

The reduced inflation target of 3% plus or minus one percentage point - the previous target was 3%-6% - announced by the SA Reserve Bank (Sarb) has ignited optimism SA is serious about getting inflation and debt servicing costs under control.

Year-on-year consumer inflation fell from 3.2% in January to 2.7% in March before edging up to 3.6% in October. However, the 3.15% average for the year remains firmly within the Sarb's target.

Inflation started the year subdued, assisted by a stronger rand and lower global commodity prices, but accelerated midyear due to higher food and energy prices.

Reasons for the cut

The latest rate cut is a reward for strong tax revenues for National Treasury, SA's removal from the Financial Action Task Force greylist and S&P Global's rating upgrade to BB with a positive outlook.

"It genuinely caught me off guard," says macro strategist Shiven Moodley, CEO of financial advisory Novaque.