{"id":840410,"date":"2025-10-20T14:00:00","date_gmt":"2025-10-20T12:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=840410"},"modified":"2025-10-20T13:57:20","modified_gmt":"2025-10-20T11:57:20","slug":"another-shift-for-interest-rate-expectations-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/840410\/another-shift-for-interest-rate-expectations-in-south-africa\/","title":{"rendered":"Another shift for interest rate expectations in South Africa"},"content":{"rendered":"\n

Bank of America’s latest fund manager survey shows that investors are nearly certain South Africa is still on an interest rate-cutting cycle, but they are less confident that the Reserve Bank will cut again in 2025.<\/p>\n\n\n\n

According to the survey’s findings, 88% of fund managers expect the next policy move by the SARB’s Monetary Policy Committee to be a cut.<\/p>\n\n\n\n

However, only 50% expect this to happen at the MPC’s final meeting in November, a shift down from the almost two-thirds that expected as much in the September survey.<\/p>\n\n\n\n

While timing remains a coin flip, investors see two 25 basis point cuts still coming in the cycle, with the repo rate expected to be 6.50% within the 12 months.<\/p>\n\n\n\n

However, current projections are for this to play out by Q2 2026\u2014a marked difference from the previous projection of the cycle running through to Q4 2026.<\/p>\n\n\n\n

The October survey also revealed a notable shift in market sentiment, with 81% of fund managers bullish on local equities and a clear rotation from resources to domestic sectors such as retailers, food producers, and banks.<\/p>\n\n\n\n

The findings point to renewed confidence in South Africa\u2019s economic outlook and easing inflation expectations, the group said.<\/p>\n\n\n\n

However, there is still a strong degree of caution.<\/p>\n\n\n\n

Lining up with recent reviews from rating agencies, fund managers also stressed that South Africa needs to see “true reform and growth” for an economic turnaround.<\/p>\n\n\n\n

More fund managers see inflation ticking higher, and fewer managers see higher growth for the country, pointing to shifts on both from the last survey.<\/p>\n\n\n\n

Stats SA is expected to publish September inflation data this week, with economists expecting no real changes from last month. Inflation is forecast at 3.5% y\/y for the month.<\/p>\n\n\n\n

Forecasts for growth, meanwhile, have ticked slightly higher, with the IMF most recently lifting its projections to 1.1% for 2025.<\/p>\n\n\n\n

The MPC will consider both factors, alongside the South African Reserve Bank’s longer-term goal to move its inflation targeting to 3.0%.<\/p>\n\n\n

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Other interest rate expectations<\/h2>\n\n\n\n

Looking at broader interest rate expectations, there is a general consensus that South Africa will still cut rates in the coming 12 months.<\/p>\n\n\n\n

According to Investec chief economist Annabel Bishop, a 25bp cut in the repo rate before the close of 2025 is almost fully factored in by financial markets, including the SARB\u2019s own forward rate curve.<\/p>\n\n\n\n

However, most economists are not expecting any more cuts in 2025, with the next policy move anticipated in the first quarter of 2026.<\/p>\n\n\n\n

Bloomberg Economics\u2019 Yvonne Mhango noted that \u201cthe 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

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

Market views are for another 50 basis points to be cut by the end of 2026, with some outlier projections pointing to a higher 75 basis points being cut.<\/p>\n\n\n\n

Over the past year, the MPC has cut a total of 125 basis points off the interest rate. The last meeting was a hold, with a 4-2 vote in favour of that position.<\/p>\n\n\n\n

Notably, the two counter votes were in favour of a 25 basis point hike, showing there is interest in cutting.<\/p>\n\n\n\n

Market analysts who favour a cut sooner rather than later\u2014including Bishop and fund managers polled by Bank of America\u2014cite overly restrictive monetary policy.<\/p>\n\n\n\n

Bishop described domestic interest rates as \u201chighly restrictive\u201d.<\/p>\n\n\n\n

While holding rates would benefit the rand as the US Fed starts a more aggressive cutting cycle (boosting the rate differential), it comes at a time when local demand is weak and inflation is in the process of moving structurally lower, she said.<\/p>\n\n\n\n

Fund managers generally agree, with over two-thirds (69%) surveyed by Bank of America saying the country’s policy rates are too restrictive.<\/p>\n\n\n\n

The MPC will meet and announce its final policy decision for the year on 20 November 2025.<\/p>\n","protected":false},"excerpt":{"rendered":"

Fund managers expect South Africa’s rate cut cycle to play out over the next nine months, with another 0.5% percentage points cut by mid-2026.<\/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":[5349,1498,6652,11019,3619],"class_list":["post-840410","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-bank-of-america","tag-investec","tag-momentum","tag-mpc","tag-sarb"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/840410","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=840410"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/840410\/revisions"}],"predecessor-version":[{"id":840418,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/840410\/revisions\/840418"}],"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=840410"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=840410"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=840410"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}