South African Reserve Bank Cuts Key Interest Rate to 7% Amid Inflation Targeting

South Africa's Reserve Bank cut its key interest rate by 25 basis points to 7%, marking the fifth reduction in the current cycle and bringing borrowing costs to their lowest since November 2022. The unanimous decision by the Monetary Policy Committee aims to target the bottom of the inflation range of 3% to 6%, with inflation having risen slightly to 3.0% in June 2025 from 2.8% in May but still within the target band. Governor Lesetja Kganyago highlighted ongoing risks, including rising food inflation, slow declines in fuel prices, and geopolitical concerns such as the new United States tariffs on South African goods set to take effect in August, which could disrupt the global economy and the country's fragile economy. Despite the recent cuts, the Reserve Bank remains cautious about upside inflation risks and expects headline inflation to average around 3.3% for the year. This July reduction is widely expected to be the last for 2025 amid these uncertainties. The rate cut aligns with economists' forecasts and is intended to expand policy space to better handle potential shocks.