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The South African Reserve Bank has cut the repo rate by 25 basis points to 7.75% at its final Monetary Policy Committee meeting of the year today.
This will see the prime lending rate of commercial banks drop to 11.25%.
The Central Bank's governor, Lesetja Kganyago said in general, monetary policy in major economies remains restrictive, and headline inflation has slowed.
"While this has provided some room for major central banks to ease rates further, over the past two months, new inflation pressures and heightened uncertainty suggest diminished policy space. With underlying inflation still above target, in several economies, there are risks of policy reversals", he said.
Kganyago says in the near term, they expect output to benefit from a variety of tailwinds, including lower inflation, higher disposable income, and extra spending from pension withdrawals via the new Two-Pot system.
"It is unclear how much this will boost the third-quarter growth numbers, which are due in a few weeks", he added.
In reaction to the rate cut, Dr Andrew Golding, chief executive of the Pam Golding Property group, said with headline consumer inflation down to 2.8% in October 2024, which is significantly lower than 3.8% in September and the lowest since February 2021, the MPC was likely to reduce the repo rate by at least a further 25bps.
He says this second reduction in the repo rate will provide further impetus to activity in the housing market – particularly among first-time buyers - who had already begun responding positively to the previous interest rate cut in September.
