By Lehlohonolo Lehana.
South African Reserve Bank (SARB) governor Lesetja Kganyago announced a 25-basis-point cut to the benchmark repo rate on Thursday, lowering it to 7.25% following the Monetary Policy Committee (MPC) meeting.
The prime lending rate for commercial banks will consequently be lowered to 10.75%.
As anticipated by economist polls and analysis ahead of the meeting, the decision was not unanimous, but surprisingly, none of the members voted to hold
Five members voted for a 25 basis point cut, and one voted for an even bigger 50 basis point cut.
Kganyago said that since the previous meeting, global economic conditions have been volatile.
“Higher tariffs on imports into the United States have been announced, and then partly reversed. US assets have sold off, while alternative safe havens, such as gold and the euro, have performed well,” he said.
“The combination of higher trade barriers, plus elevated uncertainty, is likely to weaken the world economy. We have therefore lowered our global growth projections.”
He noted the US Fed has opted to hold its rates, but other central banks have been cutting rates
For South Africa, data has been lagging. While there is no official GDP data for the first quarter yet, he said indicators for sectors like mining and manufacturing have been disappointing.
Unemployment has also risen. As such, GDP projections have been cut to only 1.2% in 2025, rising to 1.8% in 2026.
Inflation has been tracking below the Reserve Bank’s target range, driven predominantly by lower fuel costs. Average inflation expectations for the year have thus been pulled lower
This also reflects the removal of a VAT hike from the picture, which was included as a risk factor in the bank’s last calculations.
Given this backdrop, the bank opted to cut rates, bringing some relief to consumers.
Kganyago said that the MPC also considered scenarios this week using a 3% inflation target.
Speculation has been rife among analysts, economists and commentators that the central bank will soon be lower its inflation targeting, which will have a significant impact on the pace and scale of rate decisions.
Tando Ngibe, Senior Manager at Budget Insurance
This move offers some relief to consumers, particularly those managing debt, as it slightly reduces the cost of borrowing on home loans, personal loans, and credit facilities.
However, this modest cut should be seen as a chance to reinforce—not relax—responsible financial habits. At Budget Insurance, we urge consumers to use any savings from lower repayments to prioritise essential expenses, reduce high-interest debt, and build emergency funds.
While the rate cut may support economic activity, it’s important to remain cautious. Inflation risks still persist and returns on savings may decline. Consumers should continue to budget carefully in order to remain financially resilient in these uncertain times.
Hayley Parry, Money Coach and Facilitator at 1Life’s Truth About Money.
What that means is that, for anyone paying back any debt, it means that you are going to be able to save on your debt repayment. For example, for everyone million Rand you have in a home loan for instance you are now going to be paying R 515 less per month at this new interest rate, thanks to the reduction in the interest rate.
It could not come at a better time because there has been a lot of pressure on South African consumers, with increasing electricity prices kicking in. This is great news for anyone who has been feeling the pinch and been struggling to make ends meet.
Hopefully, this is going to provide a little bit of breathing room. If you happen to have any money leftover thanks to this reduction in the interest rate, my advice as always is to make sure you put aside extra cash into your emergency fund because you never know when that may come in handy.