Interest rate cuts are coming for South Africa

A spell of global interest-rate divergence is in store as central banks feel their way through the economic fog stoked by Donald Trump’s second year at the White House.

The cycle of post-pandemic tightening and easing is giving way to a less synchronised phase across advanced economies, according to Bloomberg Economics. 

Its forecasts anticipate a whole spectrum of rate paths for the world’s most-traded currencies in the coming year or so, as uncertainty and volatility — often emanating from Washington — test central bankers’ nerves.

Drawing the spotlight even more than usual will be the Federal Reserve. Its policymakers will carefully gauge mixed signals from the US economy, while also facing the prospect of a new chair picked by a critical president openly calling for rate reductions. 

BE’s forecast is for more Fed easing than the consensus view of just two cautious moves in 2026. Stripping out the US, its aggregate gauge of advanced-economy rates would end the year little changed, highlighting how fragmented policy could become. 

The South African Reserve Bank (SARB) is anticipated to extend its easing cycle after two-year inflation expectations — a key input for setting borrowing costs — fell to a record low of 3.7%, bolstering confidence in its new goal of anchoring consumer-price growth at 3%.

The 29 January meeting will be the second since Finance Minister Enoch Godongwana formally adopted the target, a move long backed by central bank officials.

Policymakers resumed rate cuts at their November meeting, lowering borrowing costs by 25 basis points.

Governor Lesetja Kganyago said after that decision that he and colleagues agreed there was scope “to make the policy stance less restrictive in the context of an improved inflation outlook,” helped by a stronger rand and softer oil prices.

“The SARB is likely to continue bringing borrowing costs down in 2026 as its inflation target shifts to 3% from 4.5%,” Bloomberg’s Yvonne Mhango said.

“It will have scope to do so — inflation is set to cool this year to 3.1%, helped by a firm rand and cooler energy prices. This would give it room for up to two 25-basis-point cuts, taking rates down from 6.75% now.”

South Africa’s current repo rate is 6.75%, with Bloomberg Economics forecasting that it will decline to 6.5% by the end of 2026.