Dawie Roodt shares good news about South African interest rates

Renowned economist Dawie Roodt said the South African Reserve Bank (SARB) has room for more interest rate cuts in 2025, which is good news for South African households.

His comments followed the Reserve Bank’s Monetary Policy Committee (MPC) decision to cut South Africa’s interest rates by 25 basis points in January.

This decision brought the repo rate down to 7.50% and the prime lending rate to 11.00%, the lowest since 2023.

This is the third rate reduction in the current cycle, which started in September 2025 with a 25 basis point cut. The MPC has cut rates by a cumulative 75 basis points since its peak.

Uncertainty around decisions from United States President Donald Trump, which could cause higher inflation, has made many economists pessimistic about further rate cuts in 2025.

However, Roodt is more optimistic about the inflation trajectory and the Reserve Bank’s ability to reduce interest rates further this year.

Roodt told Smart Money with Alishia Seckam that despite additional headwinds, the Reserve Bank still has room to cut rates by another 25 basis points.

“If we are lucky, we may see the Reserve Bank cut rates by another 50 basis points in 2025,” he said.

“In the next meeting in March, I believe the MPC will sit on their hands and not do anything. However, after that, two cuts of 25 basis points each are possible.”

The reason for Roodt’s optimism is that interest rates are contained. “My average inflation expectation for 2025 is less than 4.5%,” he said.

He added that even better news than the decrease in inflation is that inflation expectations have come down substantially.

“South Africans have been struggling for a few years. However, at long last, we are seeing inflation expectations decline,” he said.

“The decline in inflation expectations will allow the SA Reserve Bank to further reduce interest rates.”

The lower interest rates will support economic growth. However, it will not be enough to drive growth to where it should be.

Roodt told Alishia Seckam that predicting South Africa’s economic growth during the Trump Presidency was difficult.

If one puts an unexpected decision from the US President aside, Roodt expects the South African economy to grow by around 1.5%.

“The growth for 2025 is anticipated to be slightly better than 2024, but it is definitely not good enough,” he said.