PRETORIA, Nov 21 (Reuters) – South Africa’s central bank has made a small cut to its main interest rate, reducing it by 25 basis points (bps) to 7.75%. The bank emphasized that the global economic environment remains challenging and the outlook is highly uncertain, even as domestic inflation has fallen below its target.
The decision was unanimous among the Monetary Policy Committee, which did not consider a larger cut of 50 bps, as stated by South African Reserve Bank Governor Lesetja Kganyago. A majority of economists in a Reuters poll had predicted a 25 bps cut, the same size as in September.
Annual inflation sharply declined to 2.8% in October, marking its lowest level in over four years and falling below the central bank’s target range of 3% to 6%. Kganyago noted, “The Committee agreed that reducing the level of policy restrictiveness is still consistent with achieving the inflation target. The risk outlook, however, requires a cautious approach.”
He added that “global interest rates could well shift higher again,” and pointed out that the recent depreciation of the rand illustrates how quickly changes in the global environment can impact South Africa. Since Donald Trump’s U.S. election win, the rand has lost more than 3% against the dollar, alongside other emerging market currencies.
(Reporting by Tannur Anders, Bhargav Acharya and Kopano Gumbi; Editing by Alexander Winning)
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