South African Reserve Bank cuts policy rate

Published on September 20, 2024

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The Reserve Bank of South Africa lowered its main interest rate by 0.25 points to 8% on September 19 – returning to the 2021 level – against a backdrop of continued inflation. slow-down inflation, its governor announced. A measure that joins those of many nations that have started to reduce their interest rates, which they had increased in a context of accelerating inflation in the wake of the Covid-19 pandemic and the Russian invasion of Ukraine.

“Good direction”

Twelve-month inflation slowed to 4.4% in August, its lowest level in three years, close to the median value of OUR “target” of 3% to 6%, noted Governor Lesetja Kganyago, adding that he anticipates “contained inflation” below 4.5% until the end of the forecast period, at the end of 2026. “The risks of inflation are considered as measured” and “in this context, the Monetary Policy Committee (MPC) decided to reduce the policy rate by 0.25 percentage points to 8% per year, with effect from 20 September,” he explained.

The increase in consumer prices over the year, which had remained within a range of 5 to 6% for ten months, had returned to a level of 1.5 to 1.6% for the first time. July below the 5% mark (at 4.6%), its lowest level since July 2021. Inflation forecasts are “tending – slowly – in the right direction,” said the governor of bank South African power plant.

He also welcomed improved confidence in the South African economy and upwardly revised growth forecasts, particularly thanks to the recent reduction in numerous power cuts. that South Africa has been undergoing for years and “a dynamic of broadening reforms.” But, he stressed, these forecasts for South African GDP growth remain low, around 2%.

The MPC studied a possible increase in the key rate by 0.5 points, but preferred caution. “According to forecasts, rates should (…) stabilize around 7%” next year, estimated Lesetja Kganyago.

(With AFP)