South Africa’s central bank on Thursday reduced its benchmark interest rate by 25 basis points to 7.75%, taking a cautious approach amid mixed economic data and global uncertainties.
This decision follows a drop in inflation to 2.8% in October, its lowest level since June 2020, during the COVID-19 pandemic. South Africa’s Reserve Bank Governor, Lesetja Kganyago, told reporters that inflation is well-contained in the near term but remains “highly uncertain” in the medium term due to potential increases in food, electricity, and water costs, as well as rising insurance premiums and wage settlements.
While recent manufacturing data showed sluggish growth, mining performance was strong, and the unemployment rate dropped to 32.1% in the third quarter, down from 33.5% in the previous quarter, Kganyago noted.
Kganyago also expressed optimism for economic growth in the coming year, citing ongoing structural reforms in sectors like electricity and transport. “I think 25 basis points is cautious, and the environment is uncertain, which calls for caution,” he said.
He also highlighted concerns about global economic conditions, including the possibility of higher global interest rates and the recent depreciation of the rand. “Higher-than-expected inflation in the United States and Britain, along with the uncertainty around the incoming U.S. administration’s policies, are contributing factors,” Kganyago explained. He also warned about rising protectionism worldwide, which could impact global trade, a key driver of the global economy.
AFP
