The South African Reserve Bank will keep its repo rate on hold this week but cut it by 25 basis points to 8 percent in September as inflation subsides, a Reuters poll showed on Monday, earlier than a November move predicted in a June survey.
Eighteen of 20 economists surveyed last week said the central bank would keep interest rates unchanged at 8.25% on July 18, with the median forecast pointing to a rate cut in September.
Two predicted a rate cut on Thursday. The survey also forecast another 25 basis points of cuts in November, taking rates to 7.75% by the end of the year.
Even if the South African Reserve Bank cuts interest rates several times this year, it will not lead to inflation…
“We expect monetary authorities to be more cautious and cuts in repo rates to start from the fourth quarter of 2024, but after the elections a 25 basis point cut in September looks more likely,” said Geer van der Linde, senior Africa economist at Oxford Economist.
“Even if the South African Reserve Bank cuts interest rates several times this year, this will not lead to inflation as monetary policy will remain tight.”
The central bank is trying to keep inflation within a target range of 3% to 6%, and it expects inflation to slow to an average of 4.9% this year and 4.5% in 2025, from 5.2% year-on-year as of May.
Manage expectations
Gina Sjoman, head of South African research at Citi, said the likelihood of rate cuts in September and November was rapidly increasing. “The SARB simply needs to manage expectations around a normalisation of interest rates and a possible cut in the inflation target.”
South Africa's economy is expected to grow 1% this year and 1.7% in 2025. — Vuyani Ndaba, Susovan Sarkar, (c) 2024 Reuters