The South African Reserve Bank cut its key interest rate by 25 bps to 7.25% on May 29, 2025, as widely anticipated, following a pause in March, to support a faltering economy and in response to a more favourable inflation outlook.
Policymakers revised inflation forecasts downward, now expecting it to average 3.2% in 2025 (vs. 3.6% in March) and 4.2% in 2026 (down from 4.5%), citing a lower starting point, more favourable exchange rates, and the scrapping of planned VAT hikes. Growth projections were also lowered from 1.7% to 1.2%, reflecting increased downside risks.
Despite some headwinds, the outlook for structural reforms remains broadly positive. The Committee indicated a preference for steering inflation toward 3%, aiming to anchor expectations near the lower end of the target range, and plans to explore a 3% objective in future meetings. source: South African Reserve Bank
