{"id":833160,"date":"2025-07-28T10:00:00","date_gmt":"2025-07-28T08:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=833160"},"modified":"2025-07-28T09:51:57","modified_gmt":"2025-07-28T07:51:57","slug":"what-to-expect-from-interest-rates-in-south-africa-this-week-2","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/banking\/833160\/what-to-expect-from-interest-rates-in-south-africa-this-week-2\/","title":{"rendered":"What to expect from interest rates in South Africa this week"},"content":{"rendered":"\n

The South African Reserve Bank is expected to cut interest rates at least one more time this year, but economists are divided on when the cut will occur.<\/p>\n\n\n\n

The scales are currently tipped toward the SARB’s six-person Monetary Policy Committee (MPC) announcing a hold on Thursday (31 July), though there is a chance for a 25bp cut.<\/p>\n\n\n\n

Economists at FNB and Investec believe that uncertainty around the impending Trump tariffs will drive a more cautious approach by the central bank and likely lead to a hold, with the rate cut pushed out to September.<\/p>\n\n\n\n

Other views from Nedbank and Bank of America say the current data do not show underlying price pressures, and with inflation running low, the MPC is primed to cut.<\/p>\n\n\n\n

The MPC’s decision will be made against the backdrop of an uncertain global economy, with 30% tariffs on South African exports to the US set to start on 1 August.<\/p>\n\n\n\n

The tariffs are part of the Trump administration’s “Liberation Day” measures announced in April 2025, which have caused great anxiety and uncertainty in global markets and trade.<\/p>\n\n\n\n

Despite local inflation remaining at the lower end of the 3% to 6% range\u2014and consistently below the SARB’s 4.5% target\u2014the tariff uncertainty has put forecasters on edge.<\/p>\n\n\n\n

Given the resultant volatility, the MPC’s July meeting is expected to be a tight vote. <\/p>\n\n\n\n

The committee has already cut rates by 100 basis points this cycle: twice this year (25bp in January and May), following two 25bp cuts at the tail-end of 2024.<\/p>\n\n\n\n

Earlier votes had been split between a small cut and hold, while May’s vote was between a 25bp cut and a 50bp cut, reflecting the consistently low inflation levels.<\/p>\n\n\n\n

However, the MPC voted to hold rates in March as global volatility rose and local politics around the 2025 Budget continued to weigh on stability.<\/p>\n\n\n\n

This showed that global market shifts and wider uncertainty impact monetary policy, and July\/August represents another crucial shift.<\/p>\n\n\n\n

South Africa has a high inflation target and a higher risk premium during periods of volatility. The MPC has historically erred on the side of caution during these times, leading to a slow cutting cycle.<\/p>\n\n\n\n

Because the MPC’s decisions are heavily data-dependent, and volatile markets bring volatile data, some economists are pencilling in a hold on rates this week, while others see a cut.<\/p>\n\n\n\n

Group<\/th>31 July Prediction<\/th><\/tr><\/thead>
FNB<\/td>Hold<\/td><\/tr>
Investec<\/td>Hold<\/td><\/tr>
Nedbank<\/td>25bp cut<\/td><\/tr>
Bank of America<\/td>25bp cut<\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n
\n\n\n\n

FNB <\/h2>\n\n\n
\n
\"\"<\/a><\/figure><\/div>\n\n\n

FNB said there is a case for a July cut, believing that inflation should remain constrained around the 4.5% midpoint of the target range despite the increase in food prices. <\/p>\n\n\n\n

Weak oil prices and a slow recovery in economic activity should also arrest the rise in inflation. <\/p>\n\n\n\n

FNB\u2019s economists also noted that the dollar\u2019s weakness and terms of trade gains from higher precious metal prices have so far supported a resilient rand.<\/p>\n\n\n\n

\u201cThis would countervail the MPC\u2019s fears surrounding global dynamics, choosing instead to support a benign local environment,\u201d it said. <\/p>\n\n\n\n

However, FNB also provided the case for a September cut.<\/p>\n\n\n\n

It said the contentious global trade environment could weaken sentiment, lift borrowing costs and weaken the rand.\u00a0<\/p>\n\n\n\n

This would make the MPC cautious. In the May meeting, the MPC noted that US tariffs would limit growth and weaken the rand, pushing inflation higher. <\/p>\n\n\n\n

\u201cWe do not believe that the impact on inflation is that obvious, given that weak economic activity could dampen cost and exchange rate pass-through,\u201d said FNB. <\/p>\n\n\n\n

Cheaper imports from the East will likely contain inflation in South African consumer goods, including vehicles. <\/p>\n\n\n\n

\u201cTherefore, we don\u2019t expect a complete pivot in the interest rate cycle, but monetary policy would certainly be more cautious.\u201d <\/p>\n\n\n\n

\u201cUltimately, we think the MPC will keep rates unchanged at the July meeting<\/strong>, but we would not be surprised if it opted for an earlier move.\u201d<\/p>\n\n\n\n

Investec <\/h2>\n\n\n
\n
\"\"<\/a><\/figure><\/div>\n\n\n

Investec\u2019s economists have shared a similar sentiment with those at FNB, believing that one more 25-basis-point interest rate cut will occur this year and could come as early as this week, but likely not.\u00a0<\/p>\n\n\n\n

Investec said that the US Federal Reserve may remain cautious, as it has not changed its interest rate stance this year, while the SARB has not cut at every meeting. <\/p>\n\n\n\n

Moves by the Federal Reserve significantly impact South Africa, as relatively high rates in the US can draw capital to the country, weakening the rand, and vice versa. <\/p>\n\n\n\n

Investec\u2019s economists said the SARB could remain cautious this week and hold steady despite weak demand and inflation.\u00a0<\/p>\n\n\n\n

The UK and South Africa-focused bank added that the question marks over the US tariffs could severely impact the economy.\u00a0<\/p>\n\n\n\n

South Africa is a very minor US trade partner, but Minister of Trade, Industry and Competition Parks Tau said that a pre-trade deal with the US is in the works, but contingent on unspecified requirements.<\/p>\n\n\n\n

\u201cWhile SA can have an interest cut at each remaining MPC meeting this year on inflation expectation of 4.0% over the forecast period, the SARB is likely to be cautious on the uncertainty around tariffs.” <\/p>\n\n\n\n

Nedbank and BofA<\/h2>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n

Contrary to the more cautious views of FNB and Investec, Nedbank’s economists believe the MPC will cut rates by 25 basis points this week.<\/p>\n\n\n\n

This is because “inflation remains tame, the risks to the outlook are relatively balanced, and demand pressure on prices is timid at best”.<\/p>\n\n\n\n

Although inflation inched up in June, the bank said there is no evidence of mounting underlying price pressures, with headline and core inflation well below the 4.5% target. <\/p>\n\n\n\n

“Although food prices pose upside risks to the inflation outlook, global oil prices have relapsed to below $70 a barrel, the domestic economy remains sluggish, and the rand has held relatively firm,” it said.<\/p>\n\n\n\n

This is despite the threat of a 30% universal tariff on South Africa’s exports to the US come 1 August.<\/p>\n\n\n\n

“Although we see inflation rising in the months ahead, we do not expect a significant breach of the 4.5% target,” it said.<\/p>\n\n\n\n

“With monetary policy still quite restrictive and the cloud of US tariffs hanging over the economy, we believe there is justification for further easing.”<\/p>\n\n\n\n

This view was suppored by economists at Bank of America, who predict a 25 basis point cut, followed by a pause for the rest of the year.<\/p>\n\n\n\n

BofA said that inflation likely bottomed out in May at 2.8% and will continue to rise to around 4.4% by the year’s final quarter, driven by year-on-year fuel deflation.<\/p>\n\n\n\n

The bank has been more bullish on rate cuts than other banks, but it said that multiple cuts from July are unlikely as it is constrained by a narrowing differential with the US Fed, which remains on hold.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Monetary Policy Committee will make another interest rate decision this week, with economists unsure if a cut will take place. <\/p>\n","protected":false},"author":95,"featured_media":668661,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[961],"tags":[76,1498,11019,3619,4043],"class_list":["post-833160","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banking","tag-fnb","tag-investec","tag-mpc","tag-sarb","tag-south-african-reserve-bank"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/833160","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=833160"}],"version-history":[{"count":4,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/833160\/revisions"}],"predecessor-version":[{"id":833181,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/833160\/revisions\/833181"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/668661"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=833160"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=833160"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=833160"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}