South Africans are starting the year on a positive note after the South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) announced a 25-basis-point cut to the country’s repo rate, bringing it down from 7.75% to 7.50%.
The announcement was made on Thursday, 30 January, by SARB Governor Lesetja Kganyago following the MPC’s first meeting of the year. According to Kganyago, the decision was not unanimous—of the MPC members,four voted in favour of the 25-basis-point reduction, while two preferred to keep rates unchanged.
This is welcome news for South Africans still repaying home and vehicle loans, as the lower repo rate will translate into slightly reduced monthly instalments, easing the financial burden on households.
The January rate cut marks the third consecutive repo rate reduction since the COVID-19 pandemic, signalling a continued shift towards more accommodative monetary policy as the economy recovers.
FACTORS INFLUENCING THE REPO RATE: INFLATION
South Africa’s inflation rate has shown signs of moderation in recent months, creating room for the SARB to ease interest rates.
After peaking at over 7% in 2022 due to global supply chain disruptions, rising fuel costs, and local economic pressures, inflation has gradually declined.
It has been edging closer to the SARB’s target range of 3% to 6%.
Although food and fuel prices still go up and down, the overall cost of most other goods and services has stayed fairly steady.
GLOBAL INTEREST RATES
Kganyago said that the global economic situation is getting tougher, especially because of what’s been happening in The U.S with the limited space for rate cuts and the risk of further hikes.
He said that while the committee noted a challenging global economic environment, they saw room to slightly reduce policy restrictiveness.
SMALL AMOUNTS OF RELIEF
With the 25-basis-point repo rate cut, South Africans with home and car loans can expect a slight drop in their monthly repayments.
For example, on a loan of R100,000, the reduction could save you around R16 to R20 per month.
On a R500,000 loan, the saving would be roughly R80 to R100 per month, while a R1 million loan could see a reduction of about R160 to R200 per month.
While these savings may seem small, they add up over time, providing some relief for households managing debt in a tough economy.
WILL THIS REPO RATE DROP ACTUALLY BE HELPFUL TO YOUR BUDGET OR IS IT JUST A DROP IN THE OCEAN?
Let us know by leaving a comment below, or send a WhatsApp to 060 011 021 1.
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