Finance

What to expect for interest rate cuts in January 2026

Staff Writer

 ·28 Dec 2025

South Africa’s rate-cutting cycle is still in full swing, with economists anticipating another 50 basis points of cuts in 2026 and one more cut to follow in 2027.

The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) kicked off a rate-cutting cycle in September 2024, when it cut rates by 25 basis points.

The MPC’s decision at the time marked the first time since May 2023 that the central bank had changed rates.

Since the start of the cycle, the MPC has delivered a cumulative 150 basis points of cuts, dropping the repo rate from 8.25% before the cuts to 6.75% today.

The latest interest rate move was in November, where the MPC voted unanimously to cut interest rates by 25 bps, taking the repo rate to 6.75%, and the prime lending rate to 10.25%.

According to the SARB’s own forward projection model, South Africa still has room for more interest rate cuts in the new year.

Economists and analysts agree, although they are not all in agreement regarding the pace of the cuts.

Some believe the cuts will be front-loaded in 2026 to alleviate the market tension that has built up over the years, then move on to a long period of the rate being held steady as the SARB moves toward its 3% inflation target.

Others believe the rate cuts will be on hold following the November move, only being cut further once the 3% target has settled.

According to chief investment strategist at Symmetry, Izak Odendaal, the Reserve Bank’s quarterly projection model (QPM) gives a strong indication that, whatever the pace, South Africa has room for 75bps of cuts left in it.

The QPM is a forecast of where the repo rate should be, given all the other economic assumptions made by the central bank.

The QPM points to rates declining to 6% by 2027.

“The Bank always reiterates that the QPM is merely a guide, and that decisions are taken on a meeting-by-meeting basis, but it does indicate what a reasonable path for interest rates looks like,” Odendaal said.

Given that pathway, the MPC is expected to proceed gradually, given the uncertain environment.

This has analysts forecasting a pause in rate cuts in January 2026, with another 25bps cut to follow in March. The SARB could be done with cuts for the year by mid-2026.

Eyes on the Fed

One of the key factors that always comes up in projections is the rate-cutting path of the United States Federal Reserve.

The Fed and its direction are key, as they influence markets and the dollar, as well as risk-on or risk-off sentiment in global markets.

The difference between the US interest rate and the SARB interest rate—the interest rate differential—also plays a key role in the rand’s strength and willingness for investors to jump in.

Because of this, the SARB’s moves generally follow what is happening in this key market.

“Though it doesn’t always follow the US Fed, it keeps a close eye on it. In fact, the latest decision was proof that the MPC does not always have to wait for the Fed,” Odendaal noted.

In the November MPC decision, the SARB cut rates ahead of the US Fed’s decision to hold.

“Ultimately, global markets determine how freely emerging market central banks can act,” Odendaal noted.

“If the Fed turns hawkish at its upcoming meetings, not only pausing the cuts but also changing the outlook, it could lead to a stronger dollar and general market anxiety.”

The strategist noted that this would close off space for the Reserve Bank and other central banks to ease.

However, if the Fed continues to gradually ease, the Reserve Bank will have more confidence to do the same.

“Therefore, if the dollar remains the dominant global currency, we need to keep close track of American politics and policy, whether liking it or not,” he said.

South Africa’s interest rate-cutting cycle