South Africans who are deep in debt can breathe a sigh of relief as the South African Reserve Bank has finally started cutting interest rates, after being on hold since July last year, and following ten consecutive increases prior to that.

Reserve Bank Governor Lesetja Kganyago announced on Thursday afternoon that the repo rate would be cut by 25 basis points to 8.0%, which moves the prime lending (interest) rate to 11.50%.

Kganyago says members of the Monetary Policy Committee considered three options – an unchanged stance, a 25-basis point cut, and a 50-basis point cut. The MPC ultimately reached consensus on 25 basis points, agreeing that a less restrictive stance was consistent with ‘sustainably lower inflation over the medium term.’

Since November 2021, rates had increased by a whopping 475 basis points, which means the interest rate is still at a 15 year high, but consumers can expect further cuts in November, and into the new year.

Median forecasts show consumers could see cumulative cuts of a 100 basis points until May 2025, which would push the repo rate down to 7,25% – and the interest rate to 10,75%.

Some economists say today’s announcement is the start of a rate cutting cycle, which could extend into 2026.

This is especially good news for those with home loans and vehicle debt, but it’s not good news for savers, who will start getting less return on their savings.

Continued rate cuts will depend largely on whether inflation can be kept under control. August’s CPI came in at 4.4%, down from July’s 4.6% and well within the Reserve Bank’s target range.

While overall inflation has been tamed for now, largely due to decreases in the cost of transport, housing, restaurants and hotels, stubborn food inflation remains a concern for households.

Ever the Hawkish governor, Kganyago emphasised that the decisions of the MPC will continue to be data dependent, and ‘sensitive to the balance of risks to the outlook.’