{"id":846341,"date":"2025-12-12T10:36:49","date_gmt":"2025-12-12T08:36:49","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=846341"},"modified":"2025-12-12T10:36:55","modified_gmt":"2025-12-12T08:36:55","slug":"good-news-for-interest-rate-cuts-in-south-africa-3","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/846341\/good-news-for-interest-rate-cuts-in-south-africa-3\/","title":{"rendered":"Good news for interest rate cuts in South Africa"},"content":{"rendered":"\n

South African inflation expectations have dropped dramatically following the Finance Minister Enoch Godongwana’s lowering of the inflation target, opening the door for further interest rate cuts. <\/p>\n\n\n\n

According to the Bureau of Economic Research, average inflation expectations across its latest survey have dropped by half a percentage point for 2026, 2027 and the next five years. <\/p>\n\n\n\n

The respondents, including trade unions, analysts, and business people, now expect headline inflation to be 3.8% next year and 3.7% thereafter – a record low. <\/p>\n\n\n\n

The significant downward revision occurred against the backdrop of Godongwana lowering the inflation target in his Medium-Term Budget Policy Statement (MTBPS). <\/p>\n\n\n\n

Godongwana lowered the inflation target to 3%, down from the previous midpoint target of 4.5%. <\/p>\n\n\n\n

While the Finance Minister sets the target, the South African Reserve Bank (SARB) attempts to achieve it through monetary policy. <\/p>\n\n\n\n

The SARB had pushed for a lower inflation target for over a year, noting that its previous 3% to 6% target range was too wide and made South Africa less competitive. <\/p>\n\n\n\n

The SARB noted that a lower inflation target would lead to lower interest rates over the longer term. <\/p>\n\n\n\n

In the BER\u2019s latest survey, actual reported headline inflation remained steady at around 3.5% from the third to the fourth quarter.<\/p>\n\n\n\n

The overall inflation rate remains within the one percentage point range above the 3% target, which Godongwana included due to typical economic fluctuations. <\/p>\n\n\n\n

The SARB has cut interest rates by a cumulative 150 basis points to its current level of 6.75% since September 2024 amid a low inflation environment. <\/p>\n\n\n\n

Experts expect further interest rate cuts in the coming years, amid the low inflation environment. <\/p>\n\n\n\n

Investec Chief Economist Annabel Bishop forecasts the SARB will cut the repo rate by a cumulative 75 basis points by March 2027, bringing the repo rate down to 6% – in line with the SARB’s expectations. <\/p>\n\n\n\n

What the group think<\/strong>s<\/h2>\n\n\n
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The professional groups, businesspeople, and trade union officials adjusted their long-run forecasts (two and five years ahead) downward by around 0.5 percentage points. <\/p>\n\n\n\n

Analysts only lowered their estimates by 0.3 percentage points, but they started at a lower level to begin with.\u00a0<\/p>\n\n\n\n

Analysts foresee the lowest inflation two years from now, at 3.4%, while businesses expect inflation to stabilise around 4%. <\/p>\n\n\n\n

\u201cAs such, none of the groups yet expect inflation to stabilise in the long run around the new 3% target, but the broad-based downward shift is nonetheless remarkable,\u201d said the BER. <\/p>\n\n\n\n

Household inflation expectations resumed their downward trend in Q4 2025 after a brief pause in Q3; one-year expectations were observed at 5.3% (5.5% previously). <\/p>\n\n\n\n

Expectations are now at their lowest level in four years, after reaching a recent peak of 8.1% in the second quarter of 2023.<\/p>\n\n\n\n

However, in a positive for salaries, professional groups did not downwardly revise their forecast of wage growth. <\/p>\n\n\n\n

They expect salaries to rise by 4.7% next year, virtually unchanged from the 4.8% seen in Q3. <\/p>\n\n\n\n

In Q4 2025, the survey respondents expected GDP growth of 1.3% in 2026, which is very similar to the 1.2% they forecast in Q3. <\/p>\n\n\n\n

In the fourth quarter of 2025, the survey respondents expected GDP growth of 1.3% in 2026, which is very similar to the 1.2% they had forecasted for the third quarter.<\/p>\n\n\n

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Inflation expectations have reached a record low, opening the door for possible interest rate cuts in the future. <\/p>\n","protected":false},"author":95,"featured_media":828564,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[14829,1498,3619],"class_list":["post-846341","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-ber","tag-investec","tag-sarb"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/846341","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=846341"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/846341\/revisions"}],"predecessor-version":[{"id":846351,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/846341\/revisions\/846351"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/828564"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=846341"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=846341"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=846341"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}