It is good news for business and consumers that the repo rate was unanimously reduced by 25 basis points (bps) on 21 November.

In commenting on the latest Monetary Policy Committee (MPC) statement to again reduce the repo rate by 25 basis points (bps), Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says it was widely anticipated that the MPC would continue its cautious stance on easing monetary policy.

“The outlook for inflation now seems benign, with inflation likely to settle around the 4,5% midpoint of the target range of the South African Reserve Bank (SARB). Barring shocks, there must now be scope in the early months of 2025 for further interest rate cuts to underpin the incipient but uneven economic recovery.”

Prof Parsons says the SARB now projects a 2% gross domestic product (GDP) growth rate for South Africa by 2027.

“The MPC emphasises that this better growth path is based on sustaining domestic reform initiatives, maintaining prudent public debt levels and keeping wage settlements in line with productivity.”

According to Prof Parsons, there needs to be wider recognition of the extent to which short-term business confidence must steadily and deliberately be converted into long-term investor confidence, upon which higher job-rich growth ultimately depends.