South African Reserve Bank interest rate expectations – what experts say

The South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) is set to meet on Wednesday, 26 March, and most experts believe the committee will keep the repo rate unchanged.

Since the current interest rate hiking cycle started in November 2021, the MPC has hiked the repo rate ten times by a cumulative 475 basis points.

This has brought the repo rate to a decade-high of 8.25% as the SARB has attempted to bring South Africa’s high, sticky inflation down and within its target band of 3% to 6%.

Inflation moderated to within this band in mid-2023, as July’s inflation print showed CPI standing at 4.7%.

However, after slowing slightly in the following months, inflation began to climb again in October, reaching 5.9%.

Inflation fell slightly in November but has picked up again since, reaching 5.3% in January and 5.6% in February of this year.

SARB Governor Kganyago has warned that one reading does not provide sufficient reason for the MPC to cut interest rates.

He has repeatedly said the MPC would remain data-dependent and only cut interest rates once inflation has sustainably come down and is anchored around the mid-point of the target range.

As the next MPC meeting looms, Daily Investor asked experts for their interest rate predictions, and there was an overwhelming consensus that the SARB will again keep the repo rate unchanged at 8.25%.

Christie Viljoen – PwC South Africa senior economist

PwC South Africa senior economist Christie Viljoen said the SARB is expected to keep interest rates on hold this week. 

He said the central bank has forecast a slow decline in CPI towards the end of 2024 and that inflation will be near the middle of their target range by year-end. 

“This will allow the SARB to cut interest rates in the second half of this year,” he said. “For now, lending rates will remain on hold, as the upside risks to inflation remain of concern.” 

He pointed out that, most recently, warnings about adverse climate conditions and the impact that this will have on grain harvest this year will stoke concern that food price inflation will not slow down further.

Wichard Cilliers, TreasuryONE director and head of market risk

TreasuryONE director and head of market risk Wichard Cilliers said the focus will be on the SARB’s MPC decision and guidance, with expectations leaning towards maintaining current rates but with keen interest on future rate cut projections.

He said this has been influenced by changes in the Federal Reserve’s expectations and domestic inflation forecasts. 

“Will the governor give guidance on the number of cuts to come in 2024, as the Fed projected, or will he just reiterate that inflation is ticking up and the risk is toward the upside?” he asked. 

“All in all, the SARB will also communicate the higher for longer interest rate stance.”

FNB economists


FNB economists Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole, and Koketso Mano expect interest rates to remain unchanged.

However, they said the messaging at the MPC meeting remains key as many spectators of monetary policy around the globe seek indications of when interest rate cuts may be implemented. 

“The middle of the year appears to be the expected turning point following the most robust hiking campaign that brought interest rates to the highest levels since the Global Financial Crisis Period,” they said. 

“However, with inflation still above target in much of the globe and trade fragmentation still the order of the day, the difficult part of the disinflation process is yet to be complete, and risks remain tilted upwards.”

Lara Hodes – Investec economist

Investec economist Lara Hodes said the SARB is projected to leave the repo rate unchanged at 8.25% this week, which is in line with the Federal Open Market Committee’s most recent decision. 

However, going forward, she expects the SARB to begin cutting rates soon, with the first 25 basis point cut pencilled in for the end of the third quarter of 2024. 

Arthur Kamp and Patrick Buthelezi – Sanlam Investments

Sanlam Investments’ Arthur Kamp and Patrick Buthelezi said that while a pause is expected, there is cause for cautious optimism and the need for patience with South Africa’s monetary policy.

“At the heart of the matter lies the intricate interplay between domestic economic conditions and global macroeconomic dynamics,” they said. 

“Headline CPI has been trending lower from a peak of 7.8% in July 2022. Despite the recent relatively high print of 5.6% in February 2024, the downward trajectory in inflation is expected to resume over the next year towards the SARB’s effective target of 4.5%.” 

They explained that a relatively favourable inflation outlook could prompt calls for immediate rate cuts, “but prudence dictates a more nuanced approach”.

“We must acknowledge the significant influence of the US Federal Reserve’s monetary policy decisions on emerging markets like South Africa.”

They explained how, historically, shifts in US interest rates have reverberated across global financial markets, affecting currencies and inflation expectations. 

Therefore, the easing of US interest rates could provide a favourable backdrop for the SARB, facilitating a more accommodative monetary policy stance.

Furthermore, they pointed out that the recent reappointment of Lesetja Kganyago as SARB Governor signals continuity and stability in monetary policy, instilling confidence in investors and markets. 

“This continuity is crucial as the SARB navigates its mandate to secure financial stability and pursue its inflation target amidst evolving economic conditions,” they said.

Core inflation, standing at 5%, remains above the midpoint of the target range, emphasising the importance of vigilance in monetary policy deliberations. 

Further, inflation expectations remain above the central bank’s target.

“Crucially, the trajectory of inflation expectations serves as a barometer for the effectiveness of monetary policy interventions,” they explained. 

“Anchoring inflation expectations around the target range is imperative to prevent second-round effects, such as wage-price spirals, which can exacerbate inflationary pressures.”

They said that while the prospect of cutting interest rates later rather than sooner might initially evoke disappointment, it is crucial to adopt a long-term perspective. 

“Patience and prudence in monetary policy decisions lay the foundation for sustainable economic recovery.” 

They further said the MPC statement would probably be “hawkish” given the risks that could feed into inflation associated with local elections, El Nio climate effects, and the adverse impact of geopolitics. 

“That said, if inflation forecasts prove correct, the SARB is expected to start normalising rates before the end of the year, albeit a shallow cutting cycle.” 

“Overall, it is important to recognise the complexity of the economic landscape. By exercising patience and prudence, the SARB can help steer South Africa towards a path of balanced and sustainable growth.”


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