Trump’s Trade Tactics and Our Repo Rate? A Global Tug-of-War Hits SA Monetary Policy

The Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) lowered the Repo policy rate by a further 0.25% at today’s MPC meeting, from 7.25% to 7.00%. The Committee’s decision to cut rates was unanimous.

The SARB has now lowered rates a cumulative 1.25% since the easing cycle began in September 2024. At the time, the MPC was decidedly cautious, given inflation had peaked mid-2022 already, and had fallen below 6% by mid-2023.

Economists predicted the SARB would cut today, but the US Fed’s decision overnight to remain on hold, may have raised some doubts. Despite pressure from Donald Trump to cut rates, the Fed does not believe rates are overly restrictive for their economy, and they also have lingering concerns the tariffs may cause an unwelcome spike in inflation.

The SARB Governor acknowledged the climate of uncertainty globally, particularly in the wake of the new US administration’s policy agenda. Earlier in the year global growth forecasts had been revised lower by several international organisations, however this week we saw the IMF revise its growth forecasts higher again, following the tariff de-escalation. Closer to home, economic growth in SA has been anaemic this year, but the SARB expects a modest pickup from here.

The MPC now prefers a 3% inflation objective, as opposed to its historic 3% to 6% band. The intention is to anchor inflation expectations permanently lower, which in theory should allow rates to settle at a lower level as well. This bodes well for the prospect of further rate cuts down the line, which would be helpful in rekindling domestic economic growth.