South Africa’s Reserve Bank is expected to reduce interest rates for the first time in over two years, by 25 basis points next month, 19 September.
This prediction comes from a Reuters poll of economists, reflecting similar views from a previous poll.
The expected repo rate cut follows a period of stringent monetary policy aimed at curbing inflation, which slowed to 5.1% in June.
This rate reduction is expected to occur a day after the U.S. Federal Reserve is likely to begin its rate-cutting cycle after maintaining the federal funds rate steady for the past year.
The SARB’s Monetary Policy Committee experienced a split decision at the July meeting for the first time since September 2023, with four members favouring to keep rates unchanged and two supporting a 25-basis-point cut.
According to a survey, nineteen out of twenty-six economists believe the SARB will reduce its main repo rate by 25 basis points to 8.00% on September 19.
The majority also predict another 25-basis point cut in November, bringing the rate to 7.75%.
Further reductions of 25 basis points are expected in the first quarter of next year, with meetings scheduled for January and March, followed by another cut in May.
The Bank is then expected to pause at 7.25% for the rest of the year. A smaller group of forecasters predicts one more cut to 7.00% in 2026.
David Omojomolo, Africa economist at Capital Economics, noted that South Africa’s economic recovery is progressing at different speeds, with retail sales and manufacturing improving, while the mining sector remains weak.
“Nonetheless, with easing electricity shortages and interest rate cuts on the way, the economy is finally turning a corner. We expect further modest growth over the rest of this year and in 2025,” he added.
Economic growth in South Africa is projected to be 0.9% this year and 1.6% in 2025, a slight downward revision from the July survey.
South Africa’s central bank chief Lesetja Kganyago warned Thursday that lowering interest rates is not the solution to the country’s chronic inequality, while low inflation is essential for medium-term economic growth.
“There is only so much that can be achieved with monetary policy,” Kganyago told an audience on Thursday at the University of Free State in Bloemfontein, as reported by Bloomberg.
“Changing interest rates is certainly easier than improving education, managing urbanisation or ending load-shedding,” he said.
“What really matters for inequality is economic growth, job creation and productivity growth.”
The central bank maintained its benchmark interest rate at a 15-year high of 8.25% at its July meeting, continuing a restrictive policy stance to control inflation, which remains higher than desired.
Kganyago mentioned that the inflation outlook has somewhat improved, noting that the MPC had advanced its expectation for when consumer prices will stabilize at the 4.5% midpoint of the bank’s target band.
The central bank has consistently stated it will not adjust policy until it is confident that inflation is under control, which rose at an annual rate of 5.1% in June.
It now expects price pressures to slow to below 4.5% in the fourth quarter, a significant improvement from its May forecast, which did not anticipate this until the second quarter of 2025.
“Keeping inflation low and stable supports growth in the medium to long run,” Kganyago said on Thursday.
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