{"id":839454,"date":"2025-10-09T10:14:31","date_gmt":"2025-10-09T08:14:31","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=839454"},"modified":"2025-10-10T12:32:04","modified_gmt":"2025-10-10T10:32:04","slug":"big-shift-in-interest-rate-expectations-for-south-africa-4","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/trending\/839454\/big-shift-in-interest-rate-expectations-for-south-africa-4\/","title":{"rendered":"Big shift in interest rate expectations for South Africa"},"content":{"rendered":"\n

Minutes from the United States’ Federal Open Market Committee (FOMC) meeting in September have cemented market expectations for more interest rate cuts in the US this year.<\/p>\n\n\n\n

However, while lower rates in the states could open the door for a cut at the final South African Reserve Bank Monetary Policy Committee (MPC) meeting in November, economists are not betting on it.<\/p>\n\n\n\n

This is a turn from sentiment following the September meeting, where the MPC elected to hold rates.<\/p>\n\n\n\n

At the time, the SARB said it was holding rates to take in a better view of the economy and assess the impact of the 125 basis points cut in the current cycle since September 2025.<\/p>\n\n\n\n

For economists, this presented a greater likelihood for another 25 basis point cut at the central bank’s November meeting, if inflation was kept in check.<\/p>\n\n\n\n

But with the SARB now unofficially targeting a 3% inflation reading, economists are not convinced that the MPC will make any policy moves until that target is comfortably in sight.<\/p>\n\n\n\n

Bloomberg Economics\u2019 Yvonne Mhango noted that \u201c<\/em>the SARB looks set to stay on hold to defend its stricter 3% inflation goal, down from the old 4.5% focus.\u201d<\/p>\n\n\n\n

\u201cThe stance matters as inflation is on track to rise to just under the midpoint of the 3%-6% target range by year end and hold there through 2026,” she said.<\/p>\n\n\n\n

“To keep the door open for a return to the lower bound, the bank will likely keep rates at 7.0% through this year and into 2026.\u201d<\/p>\n\n\n\n

Momentum chief economist Sanisha Packirisamy also does not see another interest rate cut in 2025, but is more optimistic about cuts in the new year.<\/p>\n\n\n\n

This is because inflation is likely to shift higher in the second half of 2025, she said, which poses a shorter-term challenge for the SARB in the context of its inflation targeting.<\/p>\n\n\n\n

“While a lower inflation target has not yet been formally adopted by the Finance Minister, the SARB is guiding inflation expectations lower through open mouth operations,” she said.<\/p>\n\n\n\n

“Should inflation expectations react positively and fiscal authorities adhere to fiscally prudent policies, there remains a possibility of additional modest monetary policy easing late in 2026.”<\/p>\n\n\n\n

Good news for the rand<\/h2>\n\n\n\n
\"\"<\/a>
Investec Chief Economist, Annabel Bishop<\/figcaption><\/figure>\n\n\n\n

According to Investec chief economist Annabel Bishop, there may be room for one more 25 basis point cut by the MPC in its final November meeting, but it is not guaranteed.<\/p>\n\n\n\n

The SARB’s own forward-looking modelling shows there is room for another 25bp cut in 2025\u2014but the bank has stressed that it makes its decision on data available at the time of the meeting.<\/p>\n\n\n\n

Notably, the vote to hold rates in September was not unanimous. Four members of the committee voted to hold, while two members preferred a 25 basis point cut.<\/p>\n\n\n\n

The certainty of a US cut against the shift in expectations for a delay in local cuts has done wonders for the rand.<\/p>\n\n\n\n

The rand reached R17.14\/USD on Wednesday, running stronger as the South African Reserve Bank did not cut the repo rate at the September MPC meeting.<\/p>\n\n\n\n

With the US expected to cut by a further 50bp this year, and only a possibility of a 25bp cut in South Africa, the interest rate differential between the countries is widening.<\/p>\n\n\n\n

“A widening interest rate differential between the US and South Africa\u2019s interest rates typically results in rand strength, and the US continued to convey the message that it was prepared to look through a temporary tariff-induced rise in inflation,” Bishop said.<\/p>\n\n\n\n

In South Africa, the picture is less clear, but Bishop is of the view that interest rates are likely to come in the near term.<\/p>\n\n\n\n

Demand is weak, and CPI is in the process of moving structurally lower, she said. Combined with domestic interest rates being “highly restrictive”, this heralds further rate cuts next year at the very least.<\/p>\n","protected":false},"excerpt":{"rendered":"

Economists are less certain about further interest rate cuts this year, shifting their expectations to delayed policy action by the Reserve Bank as it chases its lower inflation target.<\/p>\n","protected":false},"author":10,"featured_media":828561,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121,1],"tags":[1850,2922,1498,6652,3619],"class_list":["post-839454","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","category-trending","tag-bloomberg","tag-interest-rates","tag-investec","tag-momentum","tag-sarb"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/839454","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=839454"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/839454\/revisions"}],"predecessor-version":[{"id":839602,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/839454\/revisions\/839602"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/828561"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=839454"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=839454"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=839454"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}