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South Africa Lowers Borrowing Costs, But Inflation Concerns Persist

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South Africa's economy - Investors King

The South African Reserve Bank (SARB) has lowered its benchmark interest rate by 25 basis points to 7.5%, the third consecutive rate cut as policymakers seek to support economic activity.

However, the Monetary Policy Committee (MPC) cautioned that inflation risks remain elevated amid heightened economic uncertainties.

Governor Lesetja Kganyago, speaking at a briefing north of Johannesburg on Thursday, confirmed the rate reduction.

“In the near term, inflation appears well contained. However, the medium-term outlook is more uncertain than usual, with material risks from the external environment,” Kganyago stated.

He explained that future rate decisions would be made on a meeting-by-meeting basis, with no predetermined path for monetary policy.

“The MPC would like to emphasize that its decisions will be made on a meeting-by-meeting basis, with no forward guidance and no pre-commitment to any specific rate path.”

While inflation has moderated in recent months, policymakers remain cautious about external factors that could drive price pressures higher.

The rand’s volatility, global commodity prices, and potential supply chain disruptions are among the key risks influencing the inflation outlook.

The decision to lower borrowing costs for the third consecutive time comes as South Africa grapples with economic headwinds, including sluggish growth, power supply constraints and global financial uncertainty. Lower rates are expected to ease financing conditions for businesses and consumers, but concerns over long-term inflation pressures persist.

With no forward guidance on future rate movements, investors and businesses will closely watch economic data and global market trends to assess the central bank’s next policy steps.

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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