NEWS: SARB Cuts Interest Rates as Inflation Drops
Financial News
The South African Reserve Bank (SARB) has dropped the interest rates by 25 basis points, bringing the repo rate down to 7.50%.
7.50%
This decision, was widely expected because inflation has recently dropped to 3.0% over December. This is well below the SARB’s preferred target of 4.5%.
Lower inflation means the cost of things at the shops and services is rising more slowly, which helps ease financial pressure on households.
The SARB Monetary Policy Committee (MPC) was slightly divided on the decision, with four members voting in favour of the cut and two preferring to rather keep rates unchanged. Inflation is expected to remain low for the first half of 2025 but the SARB believes it will start to go up again to around 4.5% later on.
Why Inflation And International Politics Matters
Inflation plays a big role in the cost of living.
When prices go up too quickly, essentials like food and fuel become a lot more expensive in a short time period, making it harder for people to manage their budgets.
The current low inflation rate is good news, as it has allowed the SARB to reduce interest rates, which can then hopefully help boost economic activity.
While South Africa’s inflation outlook seems stable for now despite all the fun and games happening in American politics at the moment, global economic uncertainty could change things.
The US Federal Reserve may raise interest rates again which could end up strengthening the US dollar. A stronger dollar often makes imports more expensive for South Africa, which could then start to push inflation higher.
Europe is struggling with weak growth and high inflation and a war on their doorstep and China’s economy is slowing down.
These global factors could impact South Africa’s economy, especially if they lead to higher prices for essential goods. Depending on these factors we might unfortunately not see another rate cut soon, as the SARB might rather start to be more conservative. A lot depends on these external factors (like the price of petrol etc).
