MNI SARB Review - May 2025: Target Revamp Talk Gains Traction

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Executive Summary:

• The MPC voted 5-1 to cut rates by 25bp; the dissenter sought a 50bp cut.
• The SARB revised its growth and inflation forecasts lower, with balanced risks.
• A scenario assuming a lower +3% Y/Y inflation target was discussed at the meeting.

The South African Reserve Bank (SARB) resumed monetary easing, with the Monetary Policy Committee (MPC) voting 5-1 to reduce the repo rate by 25bp to 7.25%. Although consensus was split between a 25bp cut and a hold (albeit leaning towards the former), the dissenter cast their vote in favour of a 50bp cut. The decision came on the back of downward revisions to growth and inflation forecasts, with the MPC assessing the risks to both as balanced overall. Governor Lesetja Kganyago signalled that the work on revising the inflation target is at an advanced stage, revealing that the MPC discussed a scenario with a +3.0% Y/Y CPI objective, which would be ‘more attractive than the +4.5% baseline.’