South Africa's Reserve Bank cut its benchmark repo rate, at which it lends to commercial banks, by 25 basis points to 6.5 percent. Picture: Reuters/Shannon Stapleton

Johannesburg - South Africa's Reserve Bank cut its benchmark repo rate, at which it lends to commercial banks, by 25 basis points to 6.5 percent on Wednesday, saying the risks to the inflation outlook had subsided.

"While the increase in the value-added tax rate to 15 percent places temporary upside pressure on inflation, this is mitigated by the stronger exchange rate which has contributed to the changing inflation risk profile," Governor Lesetja Kganyago told a news conference.

The Democratic Alliance (DA) has welcomed the announcement saying it "is a timely relief to many South Africans grappling with debt and a rising tax burden, especially Value Added Tax (VAT)."

"The MPC announcement follows the decision on Friday by credit rating agency, Moody’s, to hold South Africa’s sovereign credit rating at “Baa3”, with a stable outlook. These ‘green offshoots’ in the economy require a pragmatic economic programme of action by President Cyril Ramaphosa and Finance Minister Nhlanhla Nene to ensure that momentum is not lost," said DA's Deputy Shadow Minister of Finance, Alf Lees.

African News Agency/ANA and IOL