The South African Reserve Bank's (SARB) Monetary Policy Committee (MPC) is expected to meet on Thursday, where it will announce its decision on another possible interest rate cut.
During the last MPC announcement in September, the central bank decided to reduce the rates by 25 basis points (bsp), to 8%, bringing much needed relief to South African consumers for the first time in almost four years.
Cash-strapped consumers hope that the Reserve Bank will follow the trend of other central banks and cut the interest rate by another 25 points this month.
The September interest rate cut was the first cut the Reserve Bank made since the Covid-19 response over four years ago. The last time the Reserve Bank cut the interest rate to 3.5% in July 2020, holding stable until November 2021.
November 2021 was the beginning of a sustained incremental interest rate hike, as lending rates rose from 3.75% until a high of 8.25% in May 2023.
South Africans are now expecting a sustained a period of interest rate cuts after four years of interest rate hikes.
What do experts say?
Nedbank believes that the Reserve Bank will give South Africans another interest rate cut before the festive season.
“We expected a 25-bps cut as inflation continues to undershoot the Sarb’s 4.5% target, and the inflation outlook remains relatively subdued,” the bank said.
Nedbank further noted that there are some risks and inflation is still a problem for the country.
“However, upside risks to the inflation outlook increased somewhat over the past month,” Nedbank said.
“The most significant risk emanates from the likely change in US economic policies during the next four years following Donald Trump's emphatic victory in the US elections, which has already placed the rand under significant pressure.”
Pay attention to the US
Thys van Zyl, CEO of Everest Wealth agreed with Nedbank and said that there is a very high chance that the MPC will cut interest the interest rate on Thursday.
Another interest rate cut could be on the cards this week, and again in January, he added.
Van Zyl noted that it was important to watch the US and specifically, if Trump places higher import tariffs next year on emerging markets like South Africa.
This may increase inflation in SA, Van Zyl noted.
“The Federal Reserve (Fed) will decide on the interest rate again in December and it is expected that another cut will be announced, but thereafter, the Fed may start to become more cautious and eventually announce fewer and lower cuts than what was expected a few months ago,“ Van Zyl said.
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