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(Bloomberg) -- South Africa’s central bank lowered borrowing costs for a third straight meeting, while warning that risks to the inflation outlook have increased.
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The six-member monetary policy committee reduced its benchmark rate by 25 basis points to 7.5%, Governor Lesetja Kganyago told reporters at a briefing north of Johannesburg on Thursday. That matched the median estimate of 20 economists in a Bloomberg survey. Only one analyst penciled in a 50 basis-point cut.
“In the near-term, inflation appears well contained,” though the medium-term outlook is “more uncertain than usual, with material risks from the external environment,” Kganyago said. “The MPC would like to emphasize that its decisions will be made on a meeting-by-meeting basis, with no forward guidance and no pre-commitment to any specific rate path.”
The MPC’s decision was split, with four members voting in favor of the cut, and two favoring an unchanged stance.
The rand traded 0.5% stronger at 18.4388 per dollar by 3:44 p.m. in Johannesburg, mainly driven by a weaker dollar, while yields on benchmark South African government bonds edged higher. The benchmark stock index held onto gains, rising 0.3%.
The cautious quarter-point reduction came despite data published last week showing annual inflation running at a rate of 3%. That’s well below the 4.5% midpoint of the Reserve Bank’s inflation target range, where it seeks to anchor expectations. The measure has been under the midpoint for five months.
“Clearly the decision was an incremental hawkish shift, given the split vote” and the increased emphasis on the upside inflation risks, said Andrew Matheny, economist at Goldman Sachs. “Any incremental hawkish developments between now and March could easily tip the MPC into a hold at the next meeting.”
The bank sees inflation averaging 3.9% this year, marginally lower than its previous forecast, and 4.6% in 2026. It raised its economic growth estimate for this year to 1.8% from 1.7%.
“For now, we still see a case for rate cuts of 25 basis points each in March and in May,” said Razia Khan, chief economist for Africa and the Middle East at Standard Chartered Plc. “However, global developments will be key to whether the SARB is able to deliver this easing.”