South Africa's central bank has cut the country's key interest rate by 25 basis points to 7% following a unanimous vote by its six-member monetary policy committee (MPC).

The decision reaffirms the soundness of South Africa’s monetary policy framework and the importance of coordinated efforts to support inclusive growth. The government continues to implement structural reforms and improve the ease of doing business to unlock the economy's full potential and create jobs.

South African Reserve Bank Governor Lesetja Kganyago said the local currency, the rand, has strengthened, which has moderated inflation expectations. 

Statistics South Africa recently said price growth in the continent's most developed economy rose from 2.8% in May to 3% in June, which placed it at the bottom of the central bank's target range of 3 to 6%. Fuel prices are also falling. 

Kganyago expects headline inflation to rise over the next few months, averaging 3.3% for the year, stabilising prices. 

However, he noted, the risks to that outlook appear balanced. "Against this backdrop, the MPC decided to reduce the policy rate by 25 basis points, to 7%, with effect from the 1st of August. The decision was unanimous," he said.

This takes the prime lending rate to 10.50% from 10.75%. The government welcomed the rate cut, saying the move provides relief for South African households, many of whom continue to face financial pressure due to the rising cost of living.

"The rate cut is expected to ease the burden on consumers by lowering the cost of borrowing, while also creating conditions more conducive to stimulating investment, supporting businesses, and driving economic activity," it said in a statement.