As anticipation builds ahead of Thursday’s Monetary Policy Committee (MPC) meeting, analysts are leaning towards the expectation that the South African Reserve Bank will keep interest rates unchanged. Despite a more favourable outlook for inflation, interest rate cuts may not come until later this year.
During its previous meeting, the MPC implemented a modest 25 basis point cut that reduced the repo rate to 7% and saw the prime lending rate fall to 10.5%. This decision marked the continuation of a downward trend in borrowing costs that began in September last year, effectively lowering rates by a total of 125 basis points from a starting point of 8.25%.
The Bureau for Economic Research’s recent survey indicates that optimism is spreading among analysts, business leaders, and union representatives, who predict inflation will average 3.8% in 2025 and rise slightly to 4.2% in 2026. This shift suggests a reassuring alignment with the Reserve Bank’s inflation targeting, previously revised from 4.5% to a more ambitious 3%. Independent economist Elize Kruger said this was a positive development, though she remains firm in her belief that rates will hold steady this week.
“This is indeed an encouraging sign that the perception about inflation being moderate in South Africa is gaining traction,” Kruger said. “However, I believe that the Reserve Bank’s MPC will maintain interest rates at their current levels during Thursday’s meeting.”
Chief economist at Efficient Group, Dawie Roodt, observes that while various indicators suggest a potential for further interest rate reductions in the near future, he too foresees the Bank opting for caution. “The Reserve Bank does have room to cut rates a little bit further, but we also know that Lesetja Kganyago is quite hawkish. He aims to manage inflation expectations down to 3%, so I don’t believe there will be a cut yet,” he explained. Roodt anticipates that any subsequent adjustments may be postponed for a couple of months as the Bank weighs its options carefully.
With inflation expectations improving yet tempered by the prudent strategies of the MPC, both business and consumers will be watching closely as the Bank prepares to issue its decision. The waiting game continues, but there’s a glimmer of hope that the economic landscape may soon see further reductions in borrowing costs.