By Amy Musgrave
The government has welcomed the South African Reserve Bank’s decision to cut the repo rate by 25 basis points to 7%.
It said on Thursday the reduction provided much-needed relief for South African households as many of them continued to face financial pressure due to the rising cost of living.
“The rate cut is expected to ease the burden on consumers by lowering the cost of borrowing, while also creating conditions more conducive to stimulating investment, supporting businesses and driving economic activity,” it said in a statement.
SARB Governor Lesetja Kganyago told reporters earlier in the day that the Monetary Policy Committee’s decision was unanimous. The rate cuts take effect on 1 August.
On inflation targeting, he said that over the past few months, the prospect of a lower inflation target has bolstered the rand and lowered long-term borrowing costs.
“It is important to sustain this progress, and to minimise uncertainty about the longer-term objectives of monetary policy.
“Therefore, the MPC now prefers inflation to settle at 3%. In line with this, we have decided to aim for the bottom of our inflation target range, of 3%-6%,” Kganyago said.
The government said the decision reaffirmed the soundness of South Africa’s monetary policy framework and the importance of coordinated efforts to support inclusive growth.
It said it continued to implement structural reforms and improve the ease of doing business to unlock the full potential of the economy and create jobs.
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