Reserve Bank interest rate pause – expert reactions

Lesetja Kganyago

Experts broadly welcome the South African Reserve Bank’s (SARB) decision to keep South Africa’s interest rates on pause and expect rate cuts to start in the second half of the year.

Yesterday, the Monetary Policy Committee (MPC) announced that it would be keeping the repo rate stable for the fourth meeting in a row.

“Serious upside risks to the inflation trajectory from global and domestic sources are evident and, as noted earlier, the economic outlook is highly uncertain,” SARB Governor Lesetja Kganyago said.

This decision was in line with most experts’ expectations, who expect the SARB to keep rates stable in the first half of the year, and only consider rate cuts in H2.

In an interview earlier this month, the governor said the MPC would like to see inflation come down sustainably to the mid-point of its target – 4.5% – before interest rate cuts will be considered.

Many experts believe this will happen in the second half of this year and after the US Federal Reserve has started to cut its interest rates.

Harry Scherzer – Future Forex CEO

Future Forex CEO Harry Scherzer said the MPC’s decision was widely expected.

The pause comes despite the inflation rate in December coming down from 5.5% in November to 5.1% year-on-year in December.

“The reason that they’ve decided to hold is due to inflationary concerns such as Transnet and load-shedding,” he explained. 

“The SARB doesn’t want to jump the gun in lowering interest rates too early. In addition to that, the target inflation rate set by SARB is 3% to 6%, so 5.1% is still on the upper end of the target.” 

“So they will wait for inflation to reduce a bit more before decreasing rates. But we do seem to be at the top of the interest rate cycle at the moment. So decreases are expected later.”

Angelika Goliger – EY Africa chief economist 

EY Africa chief economist Angelik Goliger said the MPC remains concerned by inflation expectations, which are staying elevated. 

“The Governor’s statement also highlighted the risk to inflation due to local challenges and geopolitical uncertainty and its subsequent impacts on the rand and supply chains,” she said. 

“He emphasised that future decisions will be highly data-dependent.”  

Looking ahead, Goliger said the global interest rate environment in 2024 will be predominantly influenced by the decisions made by the US Federal Reserve. 

With the trend of disinflation, the US Federal Reserve is likely to execute rate cuts totalling 100 basis points in 2024, starting in May. 

“A similar picture is expected in Europe, with the European Central Bank predicted to implement a total cut of 100 basis points in 2024, starting in the second quarter of this year,” she said. 

“Notwithstanding the global context, South Africa’s MPC is projected to adopt a more cautious approach than the Federal Reserve, with rate cuts estimated to commence only in the second half of the year, which will likely total between 50 to 75 basis points in 2024.”

Mamello Matikinca-Ngwenya – FNB chief economist 


FNB chief economist Mamello Matikinca-Ngwenya said the MPC’s decision was expected and, given that policy is already restrictive and underlying demand is weak, it provides further conviction that the hiking cycle is over. 

She said the current consensus prediction is for the cutting cycle to start in Q2 2024.

“However, we think the MPC will be cautious as event risk remains high i.e. the upcoming elections and any worsening in risk sentiment as well as exchange rate pressure that is associated with that event,” she said. 

“Therefore, our view is that the first cut could be in the H2 2024.”

However, she said the MPC still requires more evidence that inflation will anchor at the 4.5% target within the policy horizon. 

Unfortunately, heightened geopolitical tensions, biosecurity as well as adverse weather patterns complicate the disinflation trend.

Professor Raymond Parsons – North-West University Business School economist 

North-West University Business School economist Professor Raymond Parsons said the tone

of the MPC’s statement remained highly cautious, as it did not see the battle against inflation

as yet being permanently won. 

“The MPC still saw upside risks to inflation in South Africa against the background of global uncertainties, inflationary expectations and sensitivity to currency weakness,” he said.

However, he said there is positive economic data that generate the real prospect that both globally and in South Africa, inflation this year is beginning to unwind and may become less entrenched. 

He said the economic evidence indicates that if the economy now evolves in line with forecasts, South Africa is at the end of the interest rate hiking cycle. 

Additionally, borrowing costs, although still in restrictive territory, could begin to decline slowly later in 2024. 

“The timing of the easing in interest rates this year will presumably be decided at the point at which the SARB is convinced that inflationary expectations have become firmly anchored,” he said. 

However, he warned that the budget and the 2024 elections still lie ahead.

Samuel Seeff – Seeff Property Group chairman

Seeff Property Group chairman Samuel Seeff welcomed the decision by the Reserve Bank to retain the repo rate unchanged at 8.25%.

However, he said it is a missed opportunity to boost the country’s economy and property market.

Given that inflation has dipped to the lowest level in months, Seeff says there was an opportunity for the bank to consider a 25 basis point rate cut. 

“At the very least, we would like to see the Bank start cutting as soon as the March meeting rather than later in the year,” he said. 

Seeff believes the Bank has been too hawkish and keeping the rate high for so long has hampered both the economy and property market. 

“This has basically resulted in all of the positive gains of the 2022 year evaporating,” he said.


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