South Africa’s central bank paused its rate cuts, keeping the repo rate at 7.50% due to trade risks and budget issues, despite stable low inflation. Governor Kganyago emphasized the need for caution. The rand remains strong despite international tensions, while a proposed VAT increase is under parliamentary review.
The South African Reserve Bank has decided to maintain its repo rate at 7.50%, pausing its cycle of rate cuts due to significant risks from global trade tensions and an unresolved national budget. This decision aligns with economists’ forecasts but different opinions were expressed among the bank’s members regarding the rate cut.
Governor Lesetja Kganyago emphasized the need for a cautious approach, citing unstable global economic conditions and domestic uncertainties. Despite low annual inflation remaining at 3.2%, concerns about the country’s economic outlook persist, particularly regarding the potential impact of a proposed increase in value-added tax, which requires parliamentary approval.
The South African rand has demonstrated resilience, appreciating more than 3% against the U.S. dollar in 2025. However, tensions with the Trump administration over land reform and international law cases raise additional concerns about economic stability in the region.
In summary, the South African Reserve Bank’s decision to halt rate cuts reflects concerns about external trade issues and internal budget challenges. With inflation held steady, the cautious approach taken by the bank highlights the delicate balance they must maintain in addressing both local and international pressures. The planned increase in value-added tax also poses potential inflationary risks that may further complicate the economic landscape.
Original Source: money.usnews.com
