SARB hints at future interest rate cuts as inflation target shifts to 3%

Monetary Policy Committee reduces benchmark lending rate by 25 basis points to 7%

- SIPHELELE DLUDLA

THE South African Reserve Bank (Sarb) has signalled potential future interest rate cuts as it embarks on a strategic adjustment to its inflation-targeting framework from the midpoint of 4.5% to 3%.

This comes as the Sarb’s Monetary Policy Committee (MPC) on Thursday unanimously reduced its benchmark lending rate for the second time in a row by 25 basis points to 7%, 2025, the lowest level since November 2022.

This means that the prime lending rate will also decline from 10.75% to 10.50% per annum.

The cut was widely anticipated amid concerns over a new US tariff regime threatening the already fragile economy.

FNB chief economist Mamello Matikinca-Ngwenya said the decision highlighted the MPC’s focus on stable domestic conditions.

Matikinca-Ngwenya said while they expected the MPC to reflect more restraint amid a contentious global trade environment that could intermittently weigh on sentiment, lift the cost of borrowing, and weaken the rand, the rates cut decision was not a surprise.

“Despite adverse global conditions and rising local inflation, as positive base effects fade and food price pressures mount, headline inflation over the coming months should remain contained around the 4.5% midpoint of the target range,’ she said.