25-Basis Point Interest Rate Cut at the South African Reserve Bank – Currency Thoughts

25-Basis Point Interest Rate Cut at the South African Reserve Bank

January 30, 2025

South Africa’s policy interest rate, as expected, was cut today. The reduction to 7.50% from 7.75% was by the same increment as the previous and first cut done at November’s policy review. Previously, the interest rate had crested and stayed at 8.0% from June 2023 until this past November. The South African Reserve Bank targets inflation at 3-6%, and last month’s on-year rise in consumer prices was at the target floor and not far from a 52-month low of 2.8% touched in October. Central bank officials expect inflation to hover below the target midpoint during the first half of 2025.

And yet, today’s released statement suggests that the scope for additional cuts may be fairly limited. Inflation is expected to move up to around the target midpoint in the second half of this year, but a bigger concern is that “the outlook for monetary policy in the United States has changed. The space for rate cuts by the Federal Reserve now looks limited, with core inflation still elevated and new inflation risks emerging, such as rising tariffs on trade. It is even possible that US rates could go up again, to stabilize inflation.”

The vote to cut South Africa’s central bank interest rate was a split one, with two of the six committee members favoring no change in its level. Relative to the baseline forecast, inflation risk is considered to be skewed to the upside over the medium term.

Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: South African Reserve Bank

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on Thursday, January 30th, 2025 at 4:01 pm and is filed under Central Bank Watch.
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