Traders scaled back their bets for South Africa\u2019s interest rate cuts this year, with markets now pricing in only one as they decipher the Federal Reserve\u2019s preference to move slower on rates and US President-elect Donald Trump\u2019s path on tariffs.<\/p>\n\n\n\n
Forward-rate agreements, used to speculate on borrowing costs, are now pricing in just a single 25-basis-point rate cut in 2025 at the central bank\u2019s monetary policy committee meeting on 30 January.<\/p>\n\n\n\n
Marek Drimal, a strategist at Societe Generale in London, said in a note to clients that the central bank may even delay the cut until March due to a less favourable market and external financial conditions.<\/p>\n\n\n\n
His view and the market\u2019s is contrary to what most economists expect for this year. <\/p>\n\n\n\n
They foresee two 25 basis point cuts this quarter to 7.25% and another by the third, bringing the bank\u2019s total reductions since it started its easing cycle in September to 125 basis points.<\/p>\n\n\n\n
Governor Lesetja Kganyago has repeatedly said the monetary policy committee would proceed with caution on rates as the outlook remains uncertain, even as its modelling signals further cuts on the horizon.<\/p>\n\n\n\n
\u201cWe should not be creating uncertainty by making moves that we would later regret,\u201d he said in an interview with CNBC Africa\u00a0last month.\u00a0<\/p>\n\n\n\n
Since the MPC\u2019s last meeting on 21 November, the rand has weakened 4.5% against the dollar on concerns that the Fed would make fewer rate cuts than expected because of the strong US economy and Trump\u2019s tariff threats.<\/p>\n\n\n\n
The weaker rand has already led to higher gasoline prices and may impact the central bank\u2019s 4% inflation forecast for this year. It prefers to anchor inflation expectations at the 4.5% midpoint of its target range.<\/p>\n\n\n\n