South Africa’s central bank just broke its four-year silence, cutting interest rates and joining the global easing party. But do not pop the champagne just yet – they are taking baby steps.
The South African Reserve Bank (SARB) nudged the main lending rate down to 8% from 8.25%. It is not exactly slashing rates with wild abandon, but it is a start. And it comes hot on the heels of inflation finally behaving itself, dipping below the midpoint of the bank’s target range.
SARB Governor Lesetja Kganyago is playing it cool, though. He is not about to go all “adventurous” with monetary policy. The bank debated holding steady or even a bigger cut, but settled on this modest trim. It is like they are dipping their toes in the water before diving in.
This move puts South Africa in step with other emerging markets that have started easing up. But after a marathon of rate hikes and a long pause, they are not about to sprint to the finish line.
The SARB thinks inflation’s going to play nice for a while, staying below their 4.5% sweet spot until at least 2026. And with power blackouts easing up and some pension reforms in the works, the economy might finally catch a break.
But don’t hold your breath for dramatic moves. The SARB is dancing a careful tango, and it is not about to step on any toes.