Government Welcomes SARB Repo Rate Cut to 7% by 25 Basis Points
Government has welcomed the South African Reserve Bank’s decision to cut the repo rate by 25 basis points to 7%, a move that brings much-needed relief to households struggling with high living costs and paves the way for easier borrowing and stronger economic growth.
In a step that has been hailed as timely support for South Africa’s economy, the South African Reserve Bank’s Monetary Policy Committee made a unanimous choice to lower the repo rate by 25 basis points to 7%, effective from 1 August 2025. This adjustment drops the prime lending rate to 10.5%, offering a glimmer of hope for consumers and businesses alike. Acting Government Spokesperson Nomonde Mnukwa shared the government’s positive view on Thursday, noting how this change eases financial pressures on families hit hard by rising prices for food, fuel and other essentials.
Details of the Monetary Policy Committee’s Decision
The announcement came from SARB Governor Lesetja Kganyago during a media briefing after the committee’s meeting. He explained that the cut reflects stable inflation trends and a careful balance to boost growth without sparking price hikes. Headline inflation is forecast to stay at 3.3% for 2025, showing that pressures are under control. The bank has also shifted its focus to a new 3% inflation target, which could lead to more cuts ahead – possibly five over the medium term – to keep real interest rates in check and support lower borrowing costs in the long run.
This is the latest in a series of adjustments, marking the lowest repo rate since November 2022. Kganyago pointed out that the rand has held firm lately, and people’s expectations about future inflation have calmed down. However, he warned that global risks like volatile commodity prices and local challenges such as energy supply issues could still affect the outlook. The bank’s growth forecast for 2025 has been trimmed to 0.9%, highlighting ongoing hurdles like slow investment and high debt levels.
The decision builds on recent economic data, where core inflation – excluding food and fuel – is expected to ease, and food prices, though still high for items like beef, are not rising as fast as before. Fuel costs have also played a part, with lower global oil prices helping to keep overall inflation in check.
Government’s Positive Response and Broader Strategy
Nomonde Mnukwa, speaking on behalf of the government, described the rate cut as a boost for everyday South Africans. “Government welcomes the decision by the South African Reserve Bank to reduce the repo rate by 25 basis points to 7%. The move provides much-needed relief for South African households, many of whom continue to face financial pressure due to the rising cost of living,” she said.
She added that lower borrowing costs will help consumers manage debts like home loans and car repayments, while making it easier for businesses to invest and expand. This, in turn, could create more jobs and spark economic activity across sectors. Mnukwa stressed that the cut shows South Africa’s monetary policy is on solid ground and underlines the need for teamwork between government and the bank to achieve inclusive growth.
The government is pushing ahead with changes to make doing business simpler, such as cutting red tape and improving infrastructure. These steps aim to unlock the economy’s full strength and tackle unemployment, which remains a big worry for many families.
Economic Impacts and Benefits for Consumers
This rate reduction means banks will likely pass on savings to customers, dropping interest on loans and credit cards. For homeowners, it could shave off hundreds of rands from monthly bond payments, giving more room in tight budgets. First-time buyers might find it easier to enter the property market, as lower rates make mortgages more affordable.
Sellers could see more interest in their homes, potentially speeding up sales in a market that has been slow. For those with variable-rate debts, the change brings immediate relief, though experts advise keeping an eye on spending to avoid new traps.
On a wider scale, cheaper loans could encourage companies to hire more workers or buy new equipment, helping to lift growth from its current low levels. However, with GDP forecasts dipped due to factors like power outages and global trade tensions, the cut is seen as a helpful nudge rather than a full fix.
Reactions from Political Parties and Unions
Several groups have cheered the move. Trade union federation COSATU called it a step in the right direction, saying it eases the squeeze on workers’ wages amid high food and transport costs. Political parties have echoed this, with some urging even bolder cuts to tackle poverty and joblessness faster.
One party described it as welcome but modest relief, pointing out that millions still battle a cost-of-living crisis and stagnant wages. They called for the bank to act more decisively now that inflation is tame. Labour groups like UASA noted the rate is the lowest in nearly three years, offering a chance for families to breathe easier.
Looking Ahead: More Cuts on the Horizon?
The SARB’s shift to a 3% inflation goal has raised hopes for further easing. Kganyago hinted that if trends hold, rates could dip below 6% in the coming years, allowing for even lower real rates that support growth without overheating prices.
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