Sarb Cuts Repo Rate To 7.50 - How This Impacts Inflation, Loans Your Wallet

The South African Reserve Bank's SARB Monetary Policy Committee MPC has reduced the repurchase rate by 25 basis points to 7.50, a move that could impact loans, savings, and economic growth.

At the start of 2024, inflation was above 5, but it has since slowed to 3 in December, thanks to favourable goods prices. On average, inflation remained at 4.4 for the year. While this is good news for consumers, experts warn that inflation could creep up again in the medium term.

Major global economies are grappling with inflation that remains above targets, forcing central banks to rethink rate cuts. In the U.S., the Federal Reserve recently held rates steady in January after three consecutive cuts, signalling a cautious approach. These international trends could influence South Africa's economic trajectory in the months ahead.

SARB expects inflation to stay within the lower half of its 3-6 target range for the first half of 2025. However, by mid-year, inflation could edge closer to 4.5, with global economic factors posing a risk of higher prices. This could impact future interest rate decisions.

After a sluggish third quarter in 2024-largely due to a steep drop in agricultural production-South Africa's economy is set to rebound in the fourth quarter. Looking ahead, growth is expected to trend upwards, reaching 2 by 2027.