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Daily Maverick
5 hours ago
- Business
- Daily Maverick
Reserve Bank cuts rates by 25 basis points after inflation outlook improves, but uncertainty reigns
Despite all of the uncertainty, this rate cut is not going to fan the flames of inflation and will perhaps provide a tiny spark to South Africa's woeful pace of economic growth. That much is at least fairly certain. The Monetary Policy Committee (MPC) of the South African Reserve Bank (Sarb) cut its key repo rate by 25 basis points on Thursday, citing an improving inflation outlook while pointedly noting that the spectre of uncertainty still haunts the global economic landscape. The move, effective from Friday, 30 May, takes the central bank's key repo rate to 7.25% and the prime lending rate to 10.75%, bringing further relief to consumers and businesses in a fragile economy that is barely growing but at least has the solace of broadly contained inflation. Consumer inflation in March and April were below Sarb's mandated 3% to 6% target range and it sees an improved outlook on this front, giving it the scope it needed to wield the scalpel. What this means for you If you are a homeowner with a bond, Seef Property Group offered a useful breakdown: As a result of the 25 basis point rate cut, monthly mortgage repayments will reduce as follows: That may not seem like a lot, but multiplied by many bonds it provides a small shot of liquidity for an ailing economy – households can spend or save that money rather than pay it on their bond. 'The undershoot of the target mainly reflects falling fuel costs, but underlying inflation is also well contained. Looking forward, we have revised down our inflation forecasts,' the MPC statement said. 'This reflects the lower starting point, as well as a stronger exchange rate assumption and lower world oil prices. These factors offset pressure on fuel costs from the higher fuel levy announced in the Budget. In addition, our previous forecast included VAT increases, which have since been cancelled.' In line with Treasury, IMF and other institutions, Sarb downgraded its forecast for South Africa's economic growth this year – a frequent feature of MPC statements which seldom upgrade the outlook on this withering front. 'We have now trimmed our GDP projections, and currently expect growth of 1.2% this year, rising to 1.8% by 2027. The outlook for structural reforms remains positive, but there are also headwinds like lower global growth,' it said. The MPC was being typically cautious but not hawkish against the backdrop of the swirling clouds of uncertainty that have shrouded the global economy – a consequence of many factors, not the least of which are US President Donald Trump's chaotic tariff tiffs. After an international drama where countries around the world were slapped with ridiculously high tariffs, Reuters reported yesterday that a US trade court blocked President Donald Trump's tariffs from going into effect in a sweeping ruling on Wednesday. The US trade court that found the president overstepped his authority by imposing across-the-board duties on imports from US trading partners. The MPC sentiment was underscored by the fact that while most economists expected the move, it was hardly an overwhelming majority in the face of so much uncertainty. 'Since our last meeting, global economic conditions have been volatile. Higher tariffs on imports into the United States have been announced, and then partly reversed,' was the statement's understated lead. Translation We have no idea what is going to happen today, tomorrow, next week or next month because of Trump's mood swings. The rand's recent performance was one of the stars of the show and that has partly been driven by the dollar's global depreciation triggered by Trump's blasting from the hip. 'The threat of rand depreciation that we warned of at our last meeting, given both global and domestic factors, manifested last month, with the currency briefly touching a multi-year low against the US dollar. However, the exchange rate has since recovered, and conditions seem more settled than they did in March, even if the global environment remains uncertain,' the MPC statement said. 'Uncertain' and 'uncertainty', while not terms of art, were the words of the day. During the Q&A that followed the reading of the statement and the rate decision, Governor Lesetja Kganyago said that he had been to five international conferences or meetings since April and they all had one overriding theme: uncertainty. 'So I have come to the conclusion: the one thing that is certain is that uncertainty is here,' Kganyago said. Uncertainty is certainly on the minds of many economists – that is for certain. 'The impact of heightened uncertainty on investor confidence and capital flows will likely continue to drive gyrations in capital and currency markets – exacerbating external vulnerabilities and keeping the Sarb cautious,' FNB chief economist Mamello Matikinca-Ngwenya said in a note on the MPC decision. Despite all of the uncertainty, this rate cut is not going to fan the flames of inflation and will perhaps provide a tiny spark to South Africa's woeful pace of economic growth. That much is at least fairly certain. Sarb may have had room for a bigger cut, but that artless word hangs in the air. DM
The Star
7 hours ago
- Business
- The Star
SA Reserve Bank cuts repo rate offering relief to consumers
Ashley Lechman | Published 4 hours ago South Africans repaying vehicle, home loans and other debts received some joy on Thursday as the South African Reserve Bank (Sarb) lowered the repurchase rate (repo rate) for the country. Sarb Governor Lesetja Kganyago announced a cut to the repurchase rate (repo rate) by 25 basis points (BPS). This came after the central bank's Monetary Policy Committee (MPC) met this week and voted to decrease the repo rate from 7.50% to 7.25%. This means that the repo rate will decrease from 7.50% to 7.25% and the prime lending rate will decrease from 11.00% to 10.75%. "In the previous MPC statement, we warned of downside risks to our growth forecast. We have now trimmed our GDP projections and currently expect growth of 1.2% this year. The outlook for structural reforms remains positive, but there are also headwinds," Kganyago said. Dr Andrew Golding, the CEO of the Pam Golding Property, said the cut is welcome relief for consumers. Golding said, "The MPC seized the opportunity to give South Africa's economy a much-needed boost in sentiment. Furthermore, with inflation surprising on the downside in recent months and, with a petrol price cut likely next month, although partially offset by the hike in the fuel levy, price pressures are likely to remain subdued. The consumer inflation rate is currently well anchored below the lower limit of the 3%-6% inflation target." Meanwhile, Samuel Seeff, the chairman of the Seeff Property, said the rate cut was welcomed, but more is needed. Seeff said, "This is the fourth rate cut by Sarb since the latter half of last year. The Bank missed a crucial opportunity to provide a more meaningful cut of at least 50bps as a vital boost for the economy, consumers and the property market. The conditions for a robust rate cut are ideal given the remarkably low inflation which, despite the recent benign increase to 2.8% is still comfortably below the SARB's 3-6% target range. Additionally, despite global volatility, the strengthened Rand poses no risk of igniting an inflationary spiral, given the subdued demand-side pressures." "Even with the latest rate cut, the interest rate is still above pre-Covid levels. This continues to erode any benefits from previous rate adjustments and remains an impediment to real economic growth so vitally needed. The high interest rate has done considerable damage to the economy. Consumers are struggling, and while this rate cut will bring much needed relief," Seeff said. As a result of the 25bps rate cut, mortgage repayments will reduce by (Based on a 20-year repayment period at the prime rate): R750 000 bond – from R7,741 to R7,614 – thus saving R127 R900 000 bond – from R9,290 to R9,137 – thus saving R153 R1 000 000 bond – from R10,322 to R10,152 – thus saving R170 R1 500 000 bond – from R15,483 to R15,228 – thus saving R255 R2 000 000 bond – from R20,644 to R20,305 – thus saving R339 R2 500 000 bond – from R25,805 to R25,381 – thus saving R424 R3 000 000 bond – from R30,966 to R30,457 – thus saving R509 R5 000 000 bond – from R51,609 to R50,761 – thus saving R848 'With inflation at historic lows and household budgets still under pressure from slow economic growth, any easing in the interest rate environment is a meaningful win for consumers. Lower borrowing costs translate directly into more affordable monthly repayments, which can help unlock greater activity in the property market,' regional director and CEO of RE/MAX of Southern Africa , Adrian Goslett said. 'For buyers, it may be a good time to explore opportunities while rates are still trending lower. For sellers, improved affordability could mean a larger pool of potential buyers, which could mean a quicker sale and more competitive offers,' Goslett added.
The Star
10 hours ago
- Business
- The Star
SA Reserve Bank cuts interest rates
Ashley Lechman | Published 5 hours ago The South African Reserve Bank (Sarb) Governor Lesetja Kganyago on Thursday announced a cut to the repurchase rate (repo rate) by 25 basis points (BPS). This comes after the central bank's Monetary Policy Committee (MPC) met this week and voted to decrease the repo rate from 7.50% to 7.25%. This means that the p rime lending rate in the country will decrease from 11.00% to 10.75%. The decision come s off the back of Statistics South Africa announcement last week that CPI inflation edged up slightly from 2.7 % in March to 2.8% in April. Kganyago said, "Five members preferred this action, while one member preferred a cut of 50 basis points." The governor said that global economic conditions have been volatile. "A combination of higher trade barriers and elevated uncertainty is likely to weaken the world economy. We have therefore lowered our global growth projections, from 3.1% to to 2.5% for 2025," he said. "In the previous MPC statement, we warned of downside risks to our growth forecast. We have now trimmed our GDP projections and currently expect growth of 1.2% this year. The outlook for structural reforms remains positive, but there are also headwinds," Kganyago said. "We have revised down our inflation forecasts. This reflects the lower starting point, as well as a stronger exchange rate assumption and lower world oil prices. Our previous forecast also included VAT increases, which have since been cancelled," the governor said on Thursday. "The threat of rand depreciation that we warned of at the previous MPC meeting manifested last month, with the currency briefly touching a multi-year low against the US dollar. However, the exchange rate has since recovered, and conditions seem more settled now than they did in March," Kganyago said. "We considered a scenario with a 3% inflation objective, which corresponds to the low end of our target range. This showed a lower path for interest rates, with the policy rate falling below 6%, instead of staying around 7%, as in our baseline forecast," he said. Ahead of today's announcement, Debt experts and economists had widely predicted a cut in the rate. Casey Sprake, an economist at Anchor Capital, said South Africa's headline consumer inflation edged slightly higher in April, rising to 2.8% year-on-year from 2.7% in March. The latest inflation data strengthened the case for monetary easing. 'With core inflation easing, wage growth muted, and consumer demand soft, real interest rates remain in restrictive territory. This means that current monetary policy is still exerting a significant dampening effect on the economy. As such, we expected the South African Reserve Bank (SARB) to cut the repo rate by 25 basis likelihood of a third rate cut later in 2025 remains evenly balanced at this stage,' Sprake said.
IOL News
11 hours ago
- Business
- IOL News
SA Reserve Bank cuts repo rate offering relief to consumers
South African Reserve Bank announces a 25 basis point cut to the repo rate, providing much-needed relief for borrowers. Experts weigh in on the implications for the economy and property market. SARB Governor Lesetja Kganyago. Image: SA Reserve Bank. South Africans repaying vehicle, home loans and other debts received some joy on Thursday as the South African Reserve Bank (Sarb) lowered the repurchase rate (repo rate) for the country. Sarb Governor Lesetja Kganyago announced a cut to the repurchase rate (repo rate) by 25 basis points (BPS). This came after the central bank's Monetary Policy Committee (MPC) met this week and voted to decrease the repo rate from 7.50% to 7.25%. This means that the repo rate will decrease from 7.50% to 7.25% and the prime lending rate will decrease from 11.00% to 10.75%. "In the previous MPC statement, we warned of downside risks to our growth forecast. We have now trimmed our GDP projections and currently expect growth of 1.2% this year. The outlook for structural reforms remains positive, but there are also headwinds," Kganyago said. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. 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Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ Property sector reacts Dr Andrew Golding, the CEO of the Pam Golding Property, said the cut is welcome relief for consumers. Golding said, "The MPC seized the opportunity to give South Africa's economy a much-needed boost in sentiment. Furthermore, with inflation surprising on the downside in recent months and, with a petrol price cut likely next month, although partially offset by the hike in the fuel levy, price pressures are likely to remain subdued. The consumer inflation rate is currently well anchored below the lower limit of the 3%-6% inflation target." More is needed Meanwhile, Samuel Seeff, the chairman of the Seeff Property, said the rate cut was welcomed, but more is needed. Seeff said, "This is the fourth rate cut by Sarb since the latter half of last year. The Bank missed a crucial opportunity to provide a more meaningful cut of at least 50bps as a vital boost for the economy, consumers and the property market. The conditions for a robust rate cut are ideal given the remarkably low inflation which, despite the recent benign increase to 2.8% is still comfortably below the SARB's 3-6% target range. Additionally, despite global volatility, the strengthened Rand poses no risk of igniting an inflationary spiral, given the subdued demand-side pressures." "Even with the latest rate cut, the interest rate is still above pre-Covid levels. This continues to erode any benefits from previous rate adjustments and remains an impediment to real economic growth so vitally needed. The high interest rate has done considerable damage to the economy. Consumers are struggling, and while this rate cut will bring much needed relief," Seeff said. As a result of the 25bps rate cut, mortgage repayments will reduce by (Based on a 20-year repayment period at the prime rate): R750 000 bond – from R7,741 to R7,614 – thus saving R127 R900 000 bond – from R9,290 to R9,137 – thus saving R153 R1 000 000 bond – from R10,322 to R10,152 – thus saving R170 R1 500 000 bond – from R15,483 to R15,228 – thus saving R255 R2 000 000 bond – from R20,644 to R20,305 – thus saving R339 R2 500 000 bond – from R25,805 to R25,381 – thus saving R424 R3 000 000 bond – from R30,966 to R30,457 – thus saving R509 R5 000 000 bond – from R51,609 to R50,761 – thus saving R848 'With inflation at historic lows and household budgets still under pressure from slow economic growth, any easing in the interest rate environment is a meaningful win for consumers. Lower borrowing costs translate directly into more affordable monthly repayments, which can help unlock greater activity in the property market,' regional director and CEO of RE/MAX of Southern Africa, Adrian Goslett said. 'For buyers, it may be a good time to explore opportunities while rates are still trending lower. For sellers, improved affordability could mean a larger pool of potential buyers, which could mean a quicker sale and more competitive offers,' Goslett added. BUSINESS REPORT Visit:
The Citizen
11 hours ago
- Business
- The Citizen
Surprise that all MPC members were in favour of repo rate cut
Economists say they agree with the decision to cut the repo rate by 25 basis points, but only expect one more this year. After the MPC had a hawkish stance in the past few repo rate decisions, economists thought that another cut would not be on the cards today. But after inflation for April was still below 3%, they started to wonder if a cut could indeed happen. Tertia Jacobs, treasury economist and fixed income specialist at Investec, says the surprise was not the 25 basis points cut, but the fact that the governor of the South African Reserve Bank (Sarb), Lesetja Kganyago, was in favour of a 50 basis point rate cut. 'We would have concurred with the 50-basis point rate cut because we see that the Sarb is behind in the rate cutting cycle. It was interesting that there was a lot of time spent on discussing a lower inflation target. The Sarb really pushed hard for the lower target, but the governor said they need the buy-in from Treasury.' ALSO READ: Reserve Bank cuts repo rate thanks to lower inflation, stronger rand Unanimous decision to cut repo rate Jee-A van der Linde, senior economist at Oxford Economics Africa, points out that five members of the Monetary Policy Committee voted for a 25 basis points cut, while one member preferred a larger cut of 50. 'Although our subjective odds shifted in favour of a 25 basis points cut, our forecast for this meeting indicated an unchanged policy rate, with voting patterns remaining tight due to the exceptionally uncertain external environment.' He says the latest repo rate cut suggests that the Sarb is comfortable with South Africa's inflation outlook, including potential upside risks to prices. 'Looking ahead, we forecast headline inflation will consistently average above 3% from the second half of 2025, trending gradually higher over the near term. 'This suggests that monetary authorities will have their work cut out for them if they want inflation expectations to decrease from current levels (4.3% in 2025 and 4.6% in 2026) to 3%. The Sarb said it will consider scenarios with a 3% objective at future MPC meetings.' ALSO READ: Repo rate cut offers no shelter from Budget 3.0 fallout for consumers It was the right decision – economist Prof Raymond Parsons, economist at the NWU Business School, says he believes the MPC decision to resume its interest rate-easing cycle by reducing rates by another 25 basis points is the right one. 'It is a welcome recognition of the changed economic circumstances which have made this possible. 'The majority view of the MPC therefore recognised the other factors which made it both desirable and practical to further cut borrowing costs for business and consumers at this key juncture in South Africa's business cycle. 'At this stage even a small reduction in interest rates can have a big positive impact on the national economic mood and on confidence levels. Although it is recognised that monetary policy cannot do the heavy lifting in South Africa's growth performance, lower borrowing costs are nevertheless supportive of the country's incipient but weak economic recovery.' ALSO READ: Reserve Bank could cut repo rate on Thursday, but will it decide to? More positive inflation outlook can bring more repo rate cuts Harry Kellan, CEO of FNB, says the repo rate cut comes at a time when there is a more positive inflation outlook for the rest of the year, along with growing urgency to boost economic activity. He expects that the repo rate will be reduced once more this year. 'Interest rates and inflation must be viewed in a wider context. We saw a sharp decline in the FNB/BER consumer sentiment measure in the first quarter of 2025, driven largely by indications of a potential VAT hike which has been removed. 'While the VAT hike uncertainty has been resolved, the recent approved budget does continue to reflect continued fiscal pressures. Consumer sentiment is also impacted by the lower-than-expected inflation increases in house prices as noted in the FNB Property Barometer.' Mamello Matikinca-Ngwenya, chief economist at FNB, says the MPC's decision to cut the repo rate highlights a greater focus on domestic fundamentals. 'The outlook on interest rates will continue to reflect the risks. Should muted local inflation and expectations that the US Fed will resume its cutting cycle before year-end prevail, our current view that another 25 basis points cut is probable this year would be supported.' ALSO READ: Repo rate: Will Reserve Bank cut or err on side of caution? Low inflation and recovery in exchange rate to thank for repo rate cut Angelika Goliger, chief economist at EY Africa, says the decision to cut the repo rate was influenced by several factors, including South Africa's low inflation, a recovery in the exchange rate and declining fuel prices. 'Globally, the US Federal Reserve remains cautious due to uncertainties around government policies and their net effect on the economy, with only two rate cuts expected this year, starting in September. 'However, the outlook for US inflation has improved following yesterday's US Court for International Trade ruling that the reciprocal tariffs imposed under the International Emergency Economic Powers Act (IEEPA) by the Trump Administration are unlawful and subject to removal. By bringing more trade policy certainty, this could build a case for the US Fed to reduce rates sooner.'
