The South African Reserve Bank’s move to cut its benchmark lending rate to a two-year low may be the last loosening of monetary policy for a while.
The central bank’s Monetary Policy Committee voted to trim the repurchase rate by 25 basis points to 6.5 percent, Governor Lesetja Kganyago told reporters Wednesday in the capital, Pretoria.
The second rate reduction since July comes as inflation slowed to a three-year low February, moving well below the midpoint of the central bank’s target range of 3 percent to 6 percent, and 2017 economic growth exceeded forecasts. It could add to the positive sentiment that gained momentum when Cyril Ramaphosa succeeded Jacob Zuma as president last month, boosting business and consumer confidence and the currency.
“While these developments are welcome, the MPC would prefer to see inflation expectations anchored closer to the midpoint of the target band,” Kganyago said. The central bank hasn’t started “a journey of cutting,” he said, with decisions “highly data-dependent.”
The central bank forecasts inflation will remain in the target band until at least the end of 2020, peaking at 5.5 percent in the first quarter of next year.
