South Africa’s central bank paused rate cuts, maintaining the repo rate at 7.50%. This decision was influenced by risks from U.S. trade policies and an unresolved national budget. Inflation remains stable at 3.2%.
On Thursday, South Africa’s central bank decided to halt its rate-cutting cycle due to concerns surrounding the risks posed by U.S. President Donald Trump’s global trade policies and the ongoing impasse regarding the national budget. This decision to maintain the repo rate at 7.50% aligns with the median forecast among economists surveyed by Reuters and follows previous rate reductions enacted in the last three monetary policy meetings.
The decision revealed a divide within the bank, as four members opted for the current rate while two advocated for a reduction of 25 basis points. Governor Lesetja Kganyago stated, “The global economy is not on a stable footing and there are also domestic uncertainties, … this calls for a cautious policy approach.”
Inflation remained steady at 3.2% in February, positioning it near the lower boundary of the central bank’s target range of 3% to 6%. Furthermore, the rand demonstrated resilience in 2025, appreciating over 3% against the U.S. dollar, despite deteriorating relations with the Trump administration regarding issues such as land reform policies.
A significant aspect of the contentious national budget is a proposed 1% increase in value-added tax, scheduled to be implemented over two years. This proposal, which currently lacks sufficient parliamentary support for passage, is anticipated to exacerbate inflationary pressures.
In summary, South Africa’s central bank has chosen to maintain the current repo rate amidst various external and domestic risks that could undermine economic stability. The ongoing challenges regarding U.S. trade relations and the national budget, coupled with stable inflation rates, underscore the bank’s cautious approach moving forward. The proposed increase in value-added tax remains a critical issue that could influence future economic conditions.
Original Source: money.usnews.com
