Johannesburg – South Africa’s central bank cut its interest rate on Thursday for the third consecutive time to revive the continent’s largest economy, which has been stalled since the Covid-19 pandemic.
The benchmark rate was reduced 25 basis points to 7.5 percent, the lowest level in nearly two years.
The cut was expected after the monthly consumer inflation rate stabilised at 3.0 percent in December and the annual rate dipped to 4.4 percent, giving the central bank room to focus on growth.
“For the fourth quarter, we anticipate a rebound” in output, Reserve Bank Governor Lesetja Kganyago said in a statement.
“We expect potential growth to trend higher over the next few years. This gets growth to about 2.0 percent by 2027,” he said.
The bank’s forecasts consider a possible “trade war scenario” with higher US tariffs and retaliatory measures by other countries triggering higher inflation and interest rates globally.
That could push the South African rand from about R18 to R21 against the dollar and cause domestic inflation to rise to 5 percent, Kganyago said.
“The forecast sees rates drifting slightly lower over the next few years, stabilising near 7.25 percent,” he said.
US President Donald Trump has threatened to impose higher tariffs on all imports to United States, though his plans are not clear at this stage.
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Compiled by Betha Madhomu
