South Africa’s monetary policy landscape shifted this week following the South African Reserve Bank’s (SARB) decision to cut the repo rate by 25 basis points to 7%, the lowest level since 2022. This move, announced by the Monetary Policy Committee (MPC), aims to support economic activity amid sluggish growth and subdued inflation, which currently sits at 3%, the bottom of the 3–6% target range. The MPC signaled that inflation is expected to average 3.3% for 2025, with risks assessed as balanced.

In response, Finance Minister Enoch Godongwana issued a statement clarifying government’s stance on inflation targeting. While the SARB expressed a preference for forecasting around a 3% inflation objective, the Minister emphasized that any formal change to the inflation-targeting framework remains a policy decision requiring Cabinet approval and broad consultation. He dismissed speculation that government would immediately endorse the SARB’s preference, stating that adjustments to the framework will follow the established process, not unilateral announcements.

The Minister reiterated the importance of policy coordination between National Treasury and the Reserve Bank while respecting the SARB’s operational independence. He underscored that fiscal and monetary authorities share the goal of price stability, but changes to the target band will not be rushed. This assurance comes amid heightened public debate on whether a lower inflation target could anchor expectations and reduce borrowing costs.

The rate cut is expected to ease pressure on households and businesses, reducing monthly repayments on loans and potentially stimulating demand. However, structural constraints—such as logistics bottlenecks and energy challenges—continue to weigh on growth prospects. The Minister reaffirmed government’s commitment to structural reforms and fiscal discipline, signaling that monetary easing alone cannot resolve South Africa’s economic challenges.