Interest rate cut coming for South Africa
The Reserve Bank’s Monetary Policy Committee (MPC) is set to meet again on Wednesday, 19 November, with many experts anticipating another 25 basis point interest rate cut.
This would mark the sixth cut in the MPC’s current cycle, and would bring the repo rate down to 6.75% and the prime lending rate to 10.25%.
It would also bring immense relief to South Africans with debt, as the MPC’s last meeting in September left many disappointed, with most members voting to keep rates unchanged.
South Africa’s current cutting cycle started in September 2024, when the MPC announced its first interest rate cut in around four years.
Since then, the committee has implemented 125 basis points worth of cuts, bringing the repo rate down from a decade-high of 8.25% to 7%.
Despite these cuts, the MPC has also managed to keep inflation contained within its 3% to 6% target range, with September’s inflation print showing CPI at 3.40%.
At its July meeting, the MPC announced that it would now prefer for inflation to settle at the bottom end of this range, 3%, and set monetary policy accordingly.
This meant the majority of MPC members opted to keep rates unchanged at its September meeting, which faced some backlash from critics who argued inflation was low enough to justify a cut.
The MPC’s preference for a lower target also came despite ongoing talks with the National Treasury about officially changing the target.
This has created some policy uncertainty, with the Reserve Bank and the National Treasury seemingly not aligned, but the matter was luckily clarified in Finance Minister Enoch Godongwana’s recent Medium-Term Budget Policy Statement (MTBPS).
In his MTBPS on 12 November, Godongwana announced that the Reserve Bank’s inflation target would officially be lowered to 3%, with a one percentage point tolerance band.
This brings South Africa’s target more in line with its global peers’, and is expected to result in lower inflation and interest rates over the long term.
However, this also means that the Reserve Bank has a far lower and more narrow target to maintain, which may necessitate higher interest rates in the short term.
Ahead of the MPC’s November meeting, several experts have shared their expectations, with most expecting the committee to announce another 25 basis point cut.
Symmetry’s Izak Odendaal
Symmetry chief investment strategist Izak Odendaal said the South African money market now discounts two more 25 basis point cuts over the next year, with the first potentially coming at the MPC’s November meeting.
“This might seem a bit counterintuitive, since many people assume that a lower inflation target automatically means higher real interest rates,” he said.
However, Odendaal pointed to four factors that could skew the MPC’s decision towards a cut.
Firstly, he explained that South Africa’s inflation outlook keeps improving with the rand at historically strong levels.
Secondly, he said that with South Africa’s inflation target now officially at 3%, the Reserve Bank will have more confidence that it can be achieved over the medium term.
“A large part of how inflation targeting works is that people must believe that inflation will be 3% (or whatever the target is),” he explained.
“It is easier to communicate to the population that the target is 3% (with government backing), versus having to explain that it aims for the lower end of a 3% to 6% range.”
He said this message will also gradually filter through the public sector, hopefully reining in above-inflation increases in administered prices and wages.
Thirdly, Odendaal said the new target’s one percentage point tolerance band, which essentially creates a target range of 2% to 4%, means inflation does not have to be precisely 3% for the MPC to cut interest rates.
“It can lower rates as long as there is confidence that inflation and expectations will converge on 3% over time,” he explained.
Lastly, Odendaal believes the positive market response to Godongwana’s MTBPS and S&P Global’s recent decision to upgrade South Africa’s ratings means the country’s risk premium has declined.
He said this has implicitly been one of the factors keeping the repo rate up.
Investec’s Annabel Bishop
Investec chief economist Annabel Bishop said financial markets expect the MPC to announce a 25 basis point cut at its November meeting.
However, she noted that it is also possible that the Reserve Bank may choose not to ease the repo rate at its last MPC meeting of the year.
This is because the United States has signalled it is unlikely to cut its interest rates again this year, given the reduced data publications in the US due to its government shutdown.
In addition, she said CPI inflation ticked up in the third quarter of 2025 and is likely to be near 3.5% in the fourth quarter as well, above the new 3% target.
“However, the SARB has made it clear that it will be flexible in achieving the inflation target this year and next,” she said.
“The SARB’s quarterly projection model forecast shows the repo rate lower from current levels, at 6.88% by the end of this year forecast at the September MPC meeting, but previously forecast at 6.69% at the July MPC meeting.”
“The door is still open for a 25 basis point cut this month, although expectations have faded somewhat after a shift away from the dovish tone at the last MPC meeting.”
Seeff Property Group’s Samuel Seeff
Seeff Property Group chairman Samuel Seeff said the circumstances are ideal for the MPC to implement a cut as high as 50 basis points.
“The economy and property market need a rate cut and there is no reason to delay it any further,” he said.
“We have recently seen positive developments on the economic front, such as the greylist exit, S&P credit rating upgrade to BB, the first in 20 years, and positive job growth data for the last quarter.”
“While the 1.2% expected growth outlook remains weak, it is nonetheless an improvement over last year, but can only improve with further economic stimulation, including a rate cut.”
He said that, while the move to a lower inflation target is welcome, South Africa’s current interest rate is still about 50 basis points too high.
Seeff added that indicators are particularly favourable for an immediate rate cut, with inflation at a historic low of around 3.2% for this year.
“It is notably lower compared to last year, and the lowest since 1994 if you exclude the Covid-anomaly and the 2004/5 boom period when economic growth was at 5%,” he said.
“The current inflation rate also sits comfortably within the Bank’s proposed new lower target of 2-4%, thus providing ample motivation for a robust cut this week.”
BER’s Lisette Ijssel de Schepper
The Bureau for Economic Research’s (BER) Lisette IJssel de Schepper expects the MPC to cut South Africa’s interest rates at its November meeting.
This is a change from the BER’s expectations prior to the MTBPS, when it expected rates to remain unchanged.
However, Ijssel de Schepper said that following the lowering of South Africa’s inflation target, the Treasury is now in lockstep with the Reserve Bank, spelling good news for interest rate cuts.
She explained that this congruence would make it easier for the Reserve Bank to guide the economy toward the new 3% target over the next two years.
Before the official target change, the BER expected that there would be a split among MPC members at its upcoming November meeting, with the majority leaning towards keeping rates on hold.
However, following the official lowering of the target, the BER believes the majority will now vote in favour of a cut.
“If anything, the possibility of a 50bps rate cut will now be discussed, although that will not be implemented,” Ijssel de Schepper said.
“Importantly, if the SARB does cut, it does not mean we will see consecutive interest rate declines in the next couple of meetings.”
“The SARB is likely to keep a close eye on inflation expectations, its CPI forecast and will fine-tune policy as risks emerge and subside.”
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