Reserve Bank governor Lesetja Kganyago
Economists forecast that the South African Reserve Bank’s (SARB) monetary policy committee (MPC) will leave interest rates unchanged when it meets next week.
The forecast comes as consumer inflation eased year-on-year in April to 5.2% from 5.3% the month before. Monthly, prices rose by 0.3% in April, Statistics South Africa’s data showed this week.
Nedbank said that although the inflation outcome was encouraging, they expect the MPC to leave interest rates unchanged until September.
“We expect the SARB to keep the repo rate at 8.25% at the next two meetings. We expect conditions will gradually become more supportive of monetary policy easing over the next 4-5 months. Consequently, we expect the first 25-bps [basis points] cut in September, followed by another of the same margin in November,” Nedbank said in a statement on Friday.
The Reserve Bank has maintained the repo rate steady at 8.25% for five consecutive meetings, since hiking it by 50 basis points in May 2023. The repo rate is the rate at which it lends to commercial banks.
The central bank targets a 3% to 6% range for annual consumer inflation. It forecasts a steady decline in the inflation rate for the year but said it would only reach the 4.5% midpoint at the end of 2025.
Investec chief economist Annabel Bishop said the bank is unlikely to cut its interest rate at the May MPC meeting — or in July or September — but she expects a 25 basis points cut in November.
Similarly, the Bureau for Economic Research said the MPC is expected to keep the interest rate unchanged but it will closely monitor the tone of the statement.
“The SARB has emphasised upside risks to inflation and inflation expectations in recent meetings and a slightly softer touch on these issues could firm up expectations of (a) SARB rate cut(s) later this year,” it said.
Nedbank projects the repo rate to end the year at 7.75%, taking the prime lending rate to 11.25%. It expects real interest rates will increase further, stabilising above 2% as inflation dips below 5% later this year and throughout next year.