Reserve Bank cuts repo rate to 7% as inflation cools

The South African Reserve Bank (SARB) has reduced the repo rate by 25 basis points to 7%.
It comes into effect from August 1.

This decision was announced by SARB Governor Lesetja Kganyago during a media briefing on July 31. It follows a unanimous vote by the bank’s Monetary Policy Committee (MPC).

Kganyago said the rate cut reflects a strengthening rand, improved inflation expectations, and stable economic indicators.

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“The June Consumer Price Index print showed headline inflation at 3% and core at 2.9%, still at the bottom of our target range,” he noted.

“While food inflation has picked up – mainly due to meat prices – and fuel prices are falling at a slower pace, we still forecast inflation to average 3.3% for the year.”

The governor confirmed that inflation is expected to stabilise around the target midpoint in the coming period, with risks to the outlook now seen as balanced.

Growth expectations revised

Economic performance in early 2025 has been mixed. Although growth in the first quarter was reported at just 0.1%, in line with SARB expectations, downward revisions to previous GDP figures and possible higher US tariffs have prompted the bank to revise its 2025 growth forecast downwards.

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“Underlying growth remains weak due to ongoing supply-side constraints, especially in logistics. Business and consumer confidence also dipped during the first half of the year,” Kganyago said.

Despite this, the SARB expects gradual improvements driven by ongoing structural reforms.

Shift in inflation targeting

Kganyago announced a shift in the SARB’s inflation targeting framework, with the bank now preferring inflation to settle at 3%, the bottom of the existing 3–6% target range.

“This strategic shift has helped strengthen the rand and reduce long-term borrowing costs,” he said.

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“We will now use forecasts anchored at 3% inflation in future MPC meetings and continue working with National Treasury to achieve lasting low inflation.”

Kganyago added that reduced inflation expectations would expand monetary policy space and enhance the resilience of the policy framework.

The move reflects the SARB’s longer-term goal of reducing uncertainty and entrenching price stability.