More good news about interest rate cuts in South Africa
South Africans look increasingly set to benefit from lower interest rates in 2026, with developments in the USA encouraging further cuts by the South African Reserve Bank (SARB).
South Africa has seen the repo rate drop to 6.75% over the last 15 months, with the SARB cutting interest rates from a high of 8.25% in September 2024.
Interest rate moves by the US Federal Reserve have a significant impact on decisions made by the SARB, as they affect the values of the rand and the dollar, respectively.
Investec Chief Economist Annabel Bishop stated that the recent acceleration in US interest rate cuts, following a pause in most of 2025, has led to a weaker dollar.
The rand has strengthened by over 10% against the dollar in the first few days of 2026 year-on-year, with much of this linked to the dollar weakness.
Bishop noted that US treasuries (government debt) rise when risk rises, as they are a safe-haven asset, strengthening the US dollar.
However, with risk-taking now on the rise, traders are selling off their safe-haven assets in search of riskier, higher-yielding assets, particularly in emerging markets.
The rand’s strength against the US dollar is very beneficial for inflation, aiding in lowering price pressure on fuel and food.
The Rand’s strength against the US dollar tends to be a good sign for inflation, as imports become less expensive.
With the USA having cut interest rates by 175 basis points in the current cutting cycle, South Africa trails with 150 basis points in cuts.
This has widened the interest rate differential between South Africa and the USA, supporting the rand’s strength and investor sentiment.
While financial markets have only fully factored in one 25-basis-point cut in South Africa, Investec sees 50 basis points’ worth of cuts in 2026.
Investec anticipates cuts in March and September 2026, lowering the repo rate to 6.25%. It also sees a further interest rate cut in March 2027.
That said, the SARB has communicated that monetary policy will need to remain somewhat restrictive for a few years until inflation expectations have subsided to 3.0% year-on-year.
“While current market conditions, economic data and SARB policy indicate further SA interest rate cuts this year, much will depend on evolving events this year, and the removal of the US universal tariffs may lower US rate cut forecasts,” said Bishop.
Good news might be around the corner
While cuts are only expected for March 2026, Aluma Capital’s Frederick Mitchell is optimistic that the SARB will cut rates in the upcoming meeting this January.
This is due to the rand’s strength against the US dollar, lower inflation and the surging gold price, which boosts South Africa’s reserves.
“The interplay of these factors creates a compelling narrative for the SARB. The recent strength of the Rand, alongside a softer US dollar, forms a robust backdrop for managing inflation expectations,” said Mitchell.
“In a context where no immediate inflation risks are evident—from both the domestic and foreign economic climates—lowering the repo rate could enhance economic growth without igniting inflationary pressures.”
He added that the SARB could provide an impetus for increased spending and investment via a rate cut, especially in light of the ongoing global uncertainties that South Africa must navigate.
The SARB convenes its next Monetary Policy Committee meeting on 29 January.
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