{"id":830240,"date":"2025-07-02T11:30:00","date_gmt":"2025-07-02T09:30:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=830240"},"modified":"2025-07-02T11:21:45","modified_gmt":"2025-07-02T09:21:45","slug":"south-africa-faces-a-tough-call-this-month","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/830240\/south-africa-faces-a-tough-call-this-month\/","title":{"rendered":"South Africa faces a tough call this month"},"content":{"rendered":"\n

South African inflation expectations fell to an almost four-year low, providing policymakers with another reason to press ahead with their easing cycle.<\/p>\n\n\n\n

However, global uncertainty continues to add pressure to the country’s risk outlook, potentionally warranting a more cautious approach from the South African Reserve Bank (SARB).<\/p>\n\n\n\n

Average inflation expectations two years ahead \u2014 which the central bank\u2019s monetary policy committee uses to inform its decision-making \u2014 slipped to 4.5% in the second quarter from 4.7% previously, according to a survey released on Wednesday by the Stellenbosch-based Bureau for Economic Research.<\/p>\n\n\n\n

The MPC prefers to anchor inflation expectations at the 4.5% midpoint of its target band, and is in talks with the National Treasury to adjust the goal to 3%.<\/p>\n\n\n\n

The data combined with low inflation bolsters the case for the panel to again cut the key interest rate by 25 basis points to 7% when it delivers its next decision.<\/p>\n\n\n\n

Forward-rate agreements, used to speculate on borrowing costs, are pricing in 18 basis points of cuts at the July 31 meeting, or a 72% chance of a 25-basis-point reduction. <\/p>\n\n\n\n

The contracts are pricing in a further 14 basis points of cuts in the remainder of the year, implying a 56% chance of a second 25-point reduction.<\/p>\n\n\n\n

The SARB’s previous rate move was to cut by 25 basis points, which was decided by a five-to-one vote. The dissenting vote called for a higher cut of 50 basis points, showing potential appetite for easing.<\/p>\n\n\n\n

Governor Lesetja Kganyago said Tuesday that South Africa\u2019s inflation rate that\u2019s been hovering near or below the floor of the MPC\u2019s 3%-to-6% target range for eight consecutive months is creating \u201copportunistic disinflation\u201d that will help policymakers to anchor price expectations at a lower level.<\/p>\n\n\n\n

Kganyago is comfortable with the trajectory of South African inflation.<\/p>\n\n\n\n

However, he said the outlook remains clouded by uncertainty stemming from geopolitical tensions, including US President Donald Trump\u2019s trade war. <\/p>\n\n\n\n

These risks warrant the central bank\u2019s current policy stance, which he characterised as still restrictive while being fairly close to a neutral setting that neither heats nor cools the economy.<\/p>\n\n\n\n

July brings uncertainty<\/h2>\n\n\n\n
\"\"<\/a>
US President Donald Trump’s reciprocal tariffs may kick in next week<\/figcaption><\/figure>\n\n\n\n

While inflation expectations are still tracking lower, not all economists and analysts are anticipating an immediate easing of interest rates as a result.<\/p>\n\n\n\n

Kganyago’s messaging around uncertainty in the market is pertinent given the importance of July for indicating how South Africa’s economic prospects will play out for the rest of the year.<\/p>\n\n\n\n

A key deadline that many will be focusing on is 9 July, when the so-called Trump Tariff pause will come to an end, with South Africa facing a potential 30% tariff on its exports.<\/p>\n\n\n\n

Trump imposed a 30% tax on US imports from South Africa in early April as part of his global “reciprocal” tariffs, before pausing their application for 90 days to allow for negotiations.<\/p>\n\n\n\n

According to the Department of Trade and Industry, the country is appealing to Washington to extend the pause beyond 9 July, having submitted another trade deal to try and avoid the worst of it.<\/p>\n\n\n\n

South Africa is hoping to exempt some of its key exports from the tariffs, including the automotive industy, which has already been hit by a 25% tariff in the States. <\/p>\n\n\n\n

As part of the deal, South Africa has offered to buy liquefied natural gas from the United States in exchange.<\/p>\n\n\n\n

The DTIC said it is hoping for the application of a 10% tariff at worst, keeping the status quo in effect.<\/p>\n\n\n\n

The outcome of the Trump tariffs is only one pressure point that the Reserve Bank will have to consider when determining its next interest rate move.<\/p>\n\n\n\n

Another is global oil prices, which spiked in June, leading to a rise in petrol and diesel prices from Wednesday (2 July). This will contribute to inflation pressure going forward.<\/p>\n\n\n\n

The SARB will also be keeping an eye on the rate decisions by the US Fed, which faces its own pressures, both economic and political<\/p>\n\n\n\n

While modelling might show more interest rate cuts this year, economists have said the path forward is not as clear-cut as low inflation readings.<\/p>\n\n\n\n

Reporting with Bloomberg<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

South African inflation expectations fell to an almost four-year low, giving the Reserve Bank another reason to cut rates. However, global uncertainty is still a major factor it can’t ignore.<\/p>\n","protected":false},"author":10,"featured_media":828563,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[14829,7530,2924],"class_list":["post-830240","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-ber","tag-inflation","tag-reserve-bank"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/830240","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\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=830240"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/830240\/revisions"}],"predecessor-version":[{"id":830243,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/830240\/revisions\/830243"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/828563"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=830240"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=830240"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=830240"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}