South Africa Reduces Interest Rate to 7.50%

South Africa’s central bank has reduced its key lending rate by 25 basis points to 7.50%, aligning with market expectations. Prior to this reduction, the rate stood at 7.75%. This decision, announced on Thursday, reflects the bank’s assessment that while inflation remains controlled, the medium-term economic outlook is more uncertain than usual.

The Monetary Policy Committee (MPC) reached a split decision, with four members favoring the rate cut, while two preferred to keep rates unchanged.

In December, annual inflation edged up to 3.0%, the latest available data, yet it remains at the lower end of the central bank’s 3%-6% target range. Throughout 2024, inflation averaged 4.4%, slightly below the mid-point of this range. Additionally, inflation expectations among analysts, business leaders, and trade union officials—key indicators monitored by the central bank—have shown signs of improvement.

This rate cut follows a previous reduction in November 2024, when the central bank lowered the rate by 25 basis points to 7.75%.