Kganyago again defends decision to cut repo rate by 25 basis points

JOHANNESBURG – South African Reserve Bank (SARB) Governor Lesetja Kganyago has again defended the central bank’s Monetary Policy Committee (MPC) decision to cut the repo rate by 25 basis points, following mounting pressure for a bigger cut.

The MPC cut the policy rates at the September meeting, bringing it down from a 15-year high of 8.25% to 8%.

Kganyago delivered the SARB and Prudential Authority’s annual results to the National Assembly’s standing committee on finance on Thursday, where he also faced questions about policy rates.

After surging 475 basis points since the November meeting in 2021, the first rate cut has already been labelled as modest compared to the United States (US) Fed’s decision to cut its Fed Rate by 50 basis points in August.

While the SARB’s 25 basis point cut came as no surprise to most economists, some consumers had hoped for more reprieve in borrowing costs.

But Kganyago said while the inflation outlook had improved, risks to inflation haven’t entirely subsided, pushing the central bank towards a more cautious approach.

“The easing of the cycles is under way globally, but how deep and how fast central banks cut rates is a matter that remains out there.”

Even at 8%, the repo rate is still the highest it’s been in more than a decade.