The South African Reserve Bank (SARB) has cut interest rates by 25 basis points to a current 7,25%, effective from 30 May.
Lesetja Kganyago, Governor of the SARB, said the reason for the cut, is a combination of higher trade barriers, plus elevated uncertainty, likely to weaken the global economy.
He also said prospects for global inflation are more complex.
“The United States could experience higher inflation from tariffs and supply-chain disruptions. Those supply-chain problems could also raise prices in other economies. At the same time, inflation could be lower, given weaker world growth, cheaper oil and abundant capacity in economies like China.”
The US Federal Reserve has kept rates unchanged but other major central banks such as the Bank of England and the European Central Bank, have cut their policy rates.
Growth projections were revised by both the IMF and rating agencies for South Africa, with GDP now projected at just 1.2% this year, rising to 1.8% by 2027.
Inflation was below 3% in April.
Kganyago said the decision has also considered factors such as a stronger exchange rate assumption and lower world oil prices. These factors offset pressure on fuel costs from the higher fuel levy announced in the Budget.
Picture: SARB