19/09/2024
The South African Reserve Bank’s Monetary Policy Committee (MPC) has lowered interest rates by 25 basis points, as anticipated, despite a significant 50 basis point cut in the US the previous night.
With this reduction, South Africa’s repo rate now stands at 8%, and the prime rate at 11.50%.
This decision by the MPC means that the monthly payment on a new R2-million home loan at the prime rate will decrease by nearly R350. Since the MPC began raising rates in 2021, repayments on a R2-million bond have increased by R7,000 per month.
SARB Governor Lesetja Kganyago indicated that the current trend of cooling inflation is expected to continue. He also mentioned that the MPC anticipates the repo rate will stabilize above 7% next year.
In August, consumer inflation fell below the Reserve Bank's target of 4.5%. The MPC was waiting for inflation to approach the 4.5% midpoint of its 3% to 6% target range before reducing rates. The cooling of inflation has largely been driven by lower fuel prices, thanks to a drop in oil prices and a strong rand. Further relief is expected, with significant diesel and petrol price cuts anticipated in early October.
