What to expect for interest rates in South Africa tomorrow

Economists expect the South African Reserve Bank (SARB) to hold interest rates in the country when the Monetary Policy Committee (MPC) announces on Thursday (20 March), with a few anticipating another 25 basis point cut.

This follows three consecutive 25 basis point cuts in the rate since September 2024.

While South Africa’s headline inflation is well within the SARB’s target range of 3% to 6%, and comfortably below the mid-point target of 4.5%, markets are wracked with uncertainty.

This is due to not only the impact of US President Donald Trump’s trade war but also the potential impact of Finance Minister Enoch Godongwana’s 0.5 percentage point VAT hike coming in May.

According to several economists, the baseline projection is for a hold on rates—however, another 25 basis point cut might still be possible.

It will all depend on how daring the MPC wants to be. Historically, the committee has erred on the side of caution.

At its last meeting, the vote to cut rates by 25 basis points was also not unanimous. Four members voted for the cut, while two voted for rates to remain unchanged.

Patrick Buthelezi, Economist at Sanlam Investments, said the SARB MPC will likely hold on rates for now, opting for a wait-and-see approach amid heightened policy uncertainty.

“There are concerns that escalating trade wars could drive inflation higher, potentially keeping interest rates higher for longer or even leading to renewed hikes,” he said.

“Further, uncertainty around the South African budget remains, given the Government of National Unity (GNU) party’s stance against tax increases. Policymakers tend to be cautious in times of heightened uncertainty.”

Buthelezi noted that South Africa’s monetary policy stance is still restrictive, suggesting there is still room for a cut in interest rate, but the timing is still highly uncertain.

Annabel Bishop, chief economist at Investec, echoed this sentiment, noting that South Africa is unlikely to cut ahead of the United States Fed, which is only expected to cut rates again in June 2025.

“Cutting interest rates again before the US does risks rand weakness. Rand weakness is negative for inflation,” she said.

This would have a domino effect, as the 2025 budget is expected to see an inflationary impact because of the close to 1%pt VAT increase, adding up to 0.5% y/y for the inflation outlook over the next twelve months.

“The MPC had already indicated it was likely to pause at the March meeting, with its last statement indicating a growing uncertainty around its forecasts and a developing wait-and-see attitude,” Bishop said.

An interest rate cut may be coming

Not all economists are convinced of a hold, however.

Old Mutual Wealth Investment Strategist Izak Odendaal said that there might still be a possibility that the SARB cuts rates by 25 basis points on Thursday—despite jitters over the VAT hike.

However, he said, the decision won’t be clear-cut, as the Reserve Bank will have to balance many different economic factors.

South Africa’s property sector, meanwhile, is crying out for a rate cut, with some even looking for a bold 50 basis point move.

Herschel Jawitz, CEO Jawitz Properties, said that, at the very least, a 25 basis point cut should be coming.

This is due to inflation being well below the 4.5% target, the rand strengthening, and the oil price being close to $70 per barrel.

“In addition, the inflation numbers indicate very little demand-driven inflation,” he said.

Standard Bank also believes that the SARB is likely to cut interest rates next week—however, it warned that if it does, it is likely the last cut for 2025.

Samuel Seeff, chairman of the Seeff Property Group, said that the interest rate should adjusts to the economic realities in South Africa.

Seeff said that the gap between inflation and the interest rate is still too high, and the interest rate needs to be brought down further.

This would “further stimulate and increase activity in the property market, but most importantly, would be a crucial incentive to stimulate economic growth, and with that job creation,” he said.

While the property sector’s wishes may be a step too far for tomorrow’s MPC announcement, economists do at least see another 25 to 50 basis point cut in rates in 2025.

However, the timing of the cuts varies, with some expecting it in the near term, while others see it staggered at the end of the year.