South Africa Central Bank Cuts Rate By 25 Bps, Signals More Easing

(RTTNews) - The South African Reserve Bank lowered the key interest rate on Thursday, citing space for less restrictive policy as policymakers assessed that the inflation outlook has improved.

The Monetary Policy Committee unanimously decided to trim the rate by 25 basis points to 6.75 percent, in line with expectations. In the previous policy session in September, the central bank had paused a year-long easing cycle.

"We assess the risks to the inflation outlook as balanced," SARB Governor Lesetja Kganyago said in a statement.

"Members agreed there was scope now to make the policy stance less restrictive, in the context of an improved inflation outlook," Kganyago added.

Last week, the SARB shifted to a new inflation target of 3 percent plus or minus 1 percentage point from the previous 3-6 percent.

Kganyago said the bank wants longer-run expectations to anchor at 3 percent, staying there even when there are shocks.

"When there are deviations, we will explain what has driven inflation away from target, and we will do what is required to get back to target," the SARB chief said.

The country's headline inflation climbed to a 13-month high of 3.6 percent in October, while the core price growth that strips out volatile items like fresh food and energy, slightly eased to 3.1 percent.

In its latest projections, the bank trimmed the headline CPI inflation forecast for this year and next by a percentage point to 3.3 percent and 3.5 percent. Core inflation forecast for this year was cut similarly to 3.4 percent, but the projection was next year was retained at 3.3 percent.