PRETORIA – South Africa’s central bank trimmed its benchmark repo rate to 6.5 percent on Wednesday, in another boost for the economy after ratings agency Moody’s left the country’s last investment-grade credit rating intact.
The 25 basis point cut had been expected by traders and economists, after a slowdown in consumer price inflation to 4.0 percent in February meant price growth was well within the central bank’s 3-6 percent target range.
Central bank governor Lesetja Kganyago told a news conference that risks to South Africa’s inflation outlook had subsided somewhat since the bank’s last monetary policy meeting in January and that the outlook for economic growth was more positive but still challenging.
Kganyago said four members of the monetary policy committee had preferred to cut the rate and that three members wanted to hold the rate on Wednesday. He said there was no discussion of a more aggressive 50 basis point rate cut.
“In this uncertain environment, future policy decisions will be highly data-dependent and sensitive to the assessment of the balance of risks to the outlook,” he said.
The central bank’s first monetary easing step since July comes as investors have piled into rand assets on hopes that new President Cyril Ramaphosa will follow through on promises to reform the economy and root out corruption.
Moody’s said on Friday that it expected to see a strengthening of South Africa’s institutions under Ramaphosa which could translate into greater economic and fiscal strength.