As South Africa braces for an impending interest rate announcement on Thursday, experts are cautiously eyeing the potential outcomes against a backdrop of rising inflation risks and changing economic currents.
The prevailing consensus suggests that the South African Reserve Bank (SARB) will either keep rates unchanged or lower them by a minor 25 basis points, with indications that further cuts may be put on hold for the foreseeable future.
In January, Reserve Bank Governor Lesetja Kganyago highlighted the prevailing "upside risks to the inflation outlook" during the last interest rate announcement, noting that two members of the Monetary Policy Committee (MPC) were already inclined towards maintaining the status quo.
Head of Advisory Services at Everest Wealth, Riaan Grobler, remarked on the current trajectory, stating, “Given the hawkish stance the Reserve Bank took during the previous announcement, it is likely to adopt a wait-and-see approach, keeping the interest rate unchanged or possibly lowering it by only 25 basis points.”
He further indicated that if a rate cut does occur, it might be the last for some time, with one or two more cuts projected later in the year.
Head of Portfolio Management and Analytics at PPS Investments, Mark Phillips, said the MPC is walking a fine line as inflation expectations tick up to 4.7% in Q1 2025, slightly above its preferred mid-point of the 3%–6% target range. The question now is whether the central bank will pause its rate-cutting cycle at 7.5% or press ahead despite increasing global risks.
IOL