{"id":809288,"date":"2025-01-29T13:00:00","date_gmt":"2025-01-29T11:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=809288"},"modified":"2025-01-29T12:56:33","modified_gmt":"2025-01-29T10:56:33","slug":"all-signs-point-to-an-interest-rate-cut-this-week","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/banking\/809288\/all-signs-point-to-an-interest-rate-cut-this-week\/","title":{"rendered":"All signs point to an interest rate cut this week"},"content":{"rendered":"\n

The South African Reserve Bank’s (SARB’s) Monetary Policy Committee (MPC) is widely expected to cut interest rates by 25 basis points tomorrow, 30 January. <\/p>\n\n\n\n

The decision comes amidst persistently low inflation rates, with the latest December figure standing at 3.0%, well below the SARB’s midpoint target of 4.5%. <\/p>\n\n\n\n

The decision also comes off the rand somewhat stabilising amid uncertain U.S. trade policies.<\/p>\n\n\n\n

\u201cDecember\u2019s CPI inflation data came in significantly below expectations at 3.0%, with all major components showing subdued price pressures,” said Johann Els, Chief Economist at Old Mutual Group.<\/p>\n\n\n\n

“This, coupled with lower inflation expectations and a relatively stable rand, creates a conducive environment for the SARB to reduce rates.” <\/p>\n\n\n\n

The latest CPI report showed that rental and owner\u2019s equivalent rent (OER) inflation was notably lower than anticipated, easing to 2.8% and 2.4% year-on-year, respectively. <\/p>\n\n\n\n

However, food and consumer goods inflation remained way below the bottom end of the 3% to 6% target range, which further alleviated fears about upward price pressures.<\/p>\n\n\n\n

Els said that these trends showed that there were minimal demand-driven inflationary risks, providing the MPC with the necessary confidence to continue with a rate cut. <\/p>\n\n\n\n

Els emphasized that these trends indicate minimal demand-driven inflationary risks, providing the MPC with the necessary confidence to proceed with the rate cut.<\/p>\n\n\n\n

\u201cWhile the rand has experienced volatility due to ongoing uncertainties surrounding U.S. tariff policies, the lack of immediate tariff increases has alleviated some market concerns,” added Els. <\/p>\n\n\n\n

“This stabilisation of the rand, combined with lower-than-expected inflation, supports the case for a measured rate reduction.” <\/p>\n\n\n\n

Els added that the anticipated rate cut aligns with the broader economic strategy to boost growth by reducing borrowing costs where inflation is below the mid-point target. <\/p>\n\n\n\n

However, the SARB’s likely cut will also be accompanied by a hawkish commentary addressing the potential external risks, such as the U.S. trade policies and their impact on the rand. <\/p>\n\n\n\n

\u201cEven though we expect a rate cut this week, the SARB is likely to issue a cautious statement that highlights the risks associated with U.S. policy shifts and their potential effects on the rand and inflation.”<\/p>\n\n\n\n

“This balanced approach ensures that the Reserve Bank remains vigilant against any unforeseen inflationary pressures.” <\/p>\n\n\n\n

Investec Chief Economist Annabel Bishop also said that the SARB’s MPC is likely to cut interest rates by 25 basis points later this week. <\/p>\n\n\n

\n
\"\"<\/a>
The Monetary Policy Committee<\/figcaption><\/figure><\/div>\n\n\n

Looking ahead<\/h2>\n\n\n\n

However, Bishop said that no interest rate cut is expected at the March MPC meeting. <\/p>\n\n\n\n

She noted that the interest rate cutting cycle is expected to slow this year, with the SARB expected to only cut again in July following two cuts in late 2024. <\/p>\n\n\n\n

Els, however, remains positive, stating that there could be up to three more potential 25 basis point rate cuts in 2025.<\/p>\n\n\n\n

“The MPC will need to stay agile, closely monitoring indicators such as currency moves, inflation expectations, and price trends to guide future monetary policy decisions,” said Els. <\/p>\n\n\n\n

Els added that the upcoming MPC meeting will also need to consider the implications of the recently signed Expropriation Bill.<\/p>\n\n\n\n

Although there has been some volatility due to the signing of the bill, it still includes strong protections for property owners and should not significantly deter investor confidence. <\/p>\n\n\n\n

The Bill may add another level of uncertainty, but Els said that the overall economic fundamentals remain robust enough to support the Reserve Bank’s current policy trajectory. <\/p>\n\n\n\n

With the global economy finding ways to deal with the complexities of US trade policies and their ripple effects, South Africa’s monetary policy stances appear poised to adapt. <\/p>\n\n\n\n

It will need to balance domestic economic stability with external economic pressures.<\/p>\n","protected":false},"excerpt":{"rendered":"

Despite fears around US policy, the South African Reserve Bank is widely expected to cut interest rates when it meets this week.<\/p>\n","protected":false},"author":95,"featured_media":806134,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[961],"tags":[1110,2760],"class_list":["post-809288","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banking","tag-old-mutual","tag-sa-reserve-bank"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/809288","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=809288"}],"version-history":[{"count":5,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/809288\/revisions"}],"predecessor-version":[{"id":809334,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/809288\/revisions\/809334"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/806134"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=809288"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=809288"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=809288"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}