Reserve Bank gives South Africans interest rate relief

The Reserve Bank’s Monetary Policy Committee (MPC) voted to cut interest rates by 25 basis points at its May meeting.

The MPC met this week to determine South Africa’s interest rates for the next two months.

Reserve Bank Governor Lesetja Kganyago announced on Thursday, 29 May 2025, that the committee voted to cut rates by 25 basis points.

This means the repo rate is now 7.25%, while the prime lending rate is 10.75%.

The decision was not unanimous, with five members favouring the 25 basis point cut and one preferring a 50 basis point cut.

This decision comes after the MPC voted to keep rates unchanged at its March meeting, as the central bank was concerned about the upside risks to the inflation outlook.

The decision to cut rates by 25 basis points comes after another low inflation outcome in April, which saw CPI at 2.8%.

This is up slightly from 2.7% in March 2025, but still below the central bank’s target range of 3% to 6%

May’s 25 basis point interest rate cut marks the fourth in this cutting cycle so far, with the MPC now having cut rates by a cumulative 100 basis points since September 2024.

In the hiking cycle that preceded these cuts, the committee raised rates by a cumulative 475 basis points, which brought interest rates to 15-year highs.

While these hikes successfully tamed inflation in South Africa, the SARB remains hawkish about upside risks to the inflation outlook.

However, South Africa’s low inflation prints over the past few months and the relative strength of the rand in recent weeks led many experts to predict this 25 basis point cut.

The SARB has repeatedly emphasised that its decisions remain data-dependent and not based purely on historical data but also on forward-looking projections.

At the announcement of the MPC’s decision, Reserve Bank Governor Lesetja Kganyago said the central bank has revised its inflation forecasts downward.

“This reflects the lower starting point, as well as a stronger exchange rate assumption and lower world oil prices,” he explained.

“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.”

He said the MPC sees balanced risks to this forecast.

“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,” the governor said.

“However, the exchange rate has since recovered, and conditions seem more settled than they did in March, even if the global environment remains uncertain.”