SA Reserve Bank Governor Lesetja Kganyago. FILE PHOTO: Jonisayi Maromo/ANA
JOHANNESBURG - The South African Reserve Bank today cut its benchmark interest rates by 25 basis points to 6.50 percent, meaning the prime lending rate will be 10 percent with effect from 29 March.  

The rate cut was the first since July last year.

 Lesetja Kganyago,  the governor of the central bank, said since the previous meeting of the Monetary Policy Committee (MPC), the risks to the inflation outlook have subsided somewhat.

“The rand has reacted positively to domestic political developments in the past months and was given further support following the recent sovereign credit rating announcement,” Kganyago said.

“The risk of a significant sell-off of South African government bonds by non-residents has therefore receded for now. Further support for the rand comes from recent dollar weakness.”

The bank further said that a key external risk to the rand remains the possibility of a tighter-than-expected stance of monetary policy in the US in particular.

The cut in rates provided a relief to under pressure consumers who are facing a first Value-Added Tax hike in the next few days, a hike in the petrol price and the introduction of the sugar tax. 

According to Trading Economics, Interest Rate in South Africa averaged 12.65 percent from 1998 until 2018, reaching an all-time high of 23.99 percent in June of 1998 and a record low of 5 percent in July of 2012.

Dr Andrew Golding, on behalf of Pam Golding Properties said that the rate cut was a further boost for market sentiment. 

Golding said, “These announcements are favourable for consumers and market sentiment. Firstly, with Moody’s decision another cloud of uncertainty has been lifted from the local economic landscape. The news reinforced recent rand strength and, since it follows a better than expected inflation release for February – with the inflation rate easing to just 4%, marginally below market expectations – this strengthened the case for an interest rate cut.  The repo rate reduction to 6.5% is the first cut since July 2017.  Based on the views of economists and various market commentators, interest rates are now likely to remain unchanged at this level for the remainder of the year."