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Reserve Bank Governor Lesetja Kganyago.
Analysts expect the Reserve Bank’s Monetary Policy Committee (MPC) to keep interest rates unchanged when it announces its decision on Thursday this week.
Despite reduced inflation expectations, the bank is expected to hold the rate-cutting cycle this week with a final cut only expected later in the year.
At its last meeting, the MPC decided to cut rates by 25 basis points, taking the repo rate to 7% and the prime lending rate to 10.5%.
The latest survey released by the Bureau for Economic Research shows that analysts, businesspeople and unionists expect inflation to average at 3.8% in 2025 and 4.2% in 2026.
Independent Economist Elize Kruger says despite the lower inflation expectations, she expects the Reserve Bank to keep interest rates unchanged this week.
“This is indeed an encouraging sign that perception about inflation being moderate in South Africa is indeed gaining traction. This is important in light of the Reserve Bank’s preference for inflation to be anchored at 3% compared to the previous 4.5%. This will be positive when the Reserve Bank’s Monetary Policy Committee meets this Thursday afternoon. Although a positive, my view is that interest rates will remain unchanged at its current level.”
Since the start of the rate-cutting cycle in September last year, the Reserve Bank has cut rates by a cumulative 125 basis points, reducing the repo rate from 8.25% at the time to 7%.
Chief Economist at Efficient Group, Dawie Roodt, says: “Everything points to a further reduction in interest rates however probably not yet. The Reserve Bank does have room to cut rates a little bit further, but we also know that Lesetja Kganyago is quite a hawk, and he wants to manage inflation expectations down to 3%. So, I don’t believe there is room for a rate cut but knowing the governor of the Reserve Bank, he will wait another two months before touching rates again.”
