What to expect for interest rate cuts in South Africa next week
The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) will meet next week for the first time in 2026 to determine the next interest rate move for the country.
While economists are sure that more interest rate cuts are coming, they are split on when to expect them.
Most forecasts project at least another 50 basis points of cuts in 2026, followed by another 25 basis points in 2027.
Following the South African Reserve Bank’s 25-basis-point cut at its final meeting in November 2025, most commentators believed the central bank’s next move would be to pause and assess the impact of the cuts made that year.
This would have put a hold on the calendar for the SARB’s January meeting, a cut in March, another hold in May, and a final cut in July for 2026.
However, given the strong start to the year for the rand against the dollar—where it edged towards R16.30/$ in the first weeks—some market commentators believe there is a case for an earlier cut.
Aluma Capital Chief Economist Frederick Mitchell noted earlier this year that the stronger rand, a boom in commodities and steady inflation mean there’s room for the MPC to cut interest rates further in January.
Other experts, including academics, have posited that the SARB has held interest rates in restrictive territory for far too long—finally broken by the November cut—and that more rapid cuts would boost growth.
Of course, a more rapid lowering of interest rates would require careful consideration from the historically hawkish SARB, especially given volatile global trading conditions, which appear to change on a whim.
There is also a concerted focus on moving inflation towards the new 3% target, which will take around two years to settle.
It’s this cautious position that has other economists convinced the Reserve Bank will rather hold rates and proceed slowly.
“The SARB has been very cautious on easing monetary policy, preferring a tight stance,” said Investec Chief Economist, Annabel Bishop.
“The MPC seeks to suppress the inflation environment and, over the medium-term, embed the inflation rate at the new target of 3.0% y/y.”
She noted that the SARB has been explicit about this, saying “we are in a very uncertain environment and it’s important we move with caution”.
Beyond next week
Despite the caution, interest rate cuts are coming, with Bishop anticipating a hold in January and two 25-basis-point cuts in Q2 (March) and Q3 (likely July).
As the country draws closer to settling on the 3% inflation rate, more interest rate cuts are likely to follow.
The SARB’s quarterly projection model forecasts the repo rate reaching 5.75% in the outer years of the forecast horizon (i.e., by the end of 2028), with the steady-state repo rate at 5.50%.
“From the current 6.75% repo rate, this implies another 125bp cut in interest rates, and we currently expect this to be reached in 2029,” Bishop said.
“That is when the repo rate reaches 5.50% in South Africa.”
However, Bishop stressed that much depends on the inflation outlook and economic environment, and whether South Africa can stick to the 3% inflation target.
“We expect the next move in the repo rate will be in March this year, a 25bp drop, as CPI inflation falls to 3.0% y/y in February,” she said.
The SARB convenes its next Monetary Policy Committee meeting next week, with the announcement coming on 29 January.
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