Homeowners in South Africa could soon get some financial relief, with the possibility of three 25 basis point interest rate cuts over the course of 2026.<\/p>\n\n\n\n
Izak Odendaal, Investment Strategist at Old Mutual Wealth, believes South Africa is heading into 2026 with a far more supportive inflation backdrop, which creates space for further interest rate relief.<\/p>\n\n\n\n
As 2025 winds down, he said the inflation picture is \u201clooking fairly good,\u201d noting that South Africa now has a clearer inflation anchor around 3%, with some flexibility on either side.<\/p>\n\n\n\n
\u201cWe are sitting at nice and low inflation, and hopefully that holds going forward,\u201d he said, adding that both the recent trend and the outlook remain encouraging.<\/p>\n\n\n\n
Odendaal said several factors have contributed to this benign inflation environment. \u201cWe\u2019ve seen the rand strengthen quite a bit during the course of this year, oil prices [are] low,\u201d Odendaal said. <\/p>\n\n\n\n
\u201cBut also importantly, the sectors that are not linked directly to the exchange rate or to energy prices are also showing pretty low inflation.\u201d<\/p>\n\n\n\n
This broad-based moderation matters for the South African Reserve Bank, which ultimately wants inflation expectations to shift lower.<\/p>\n\n\n\n
According to Odendaal, the goal is for South Africans to get used to the idea of 3% inflation, because that changes behaviour across the economy, from how businesses set prices to how wage negotiations are approached.<\/p>\n\n\n\n
While inflation may tick slightly higher in the short term, Odendaal described the outlook as muted. \u201cIt\u2019ll probably creep up over the next couple of months, but then it reaches a base and starts declining again,\u201d he said. <\/p>\n\n\n\n
This environment explains why the Reserve Bank was able to cut interest rates in November, and why expectations are now firmly shifting toward further easing.<\/p>\n\n\n\n
Against this backdrop, Odendaal believes there is room for more interest rate cuts in 2026. Prime lending rates have already come down significantly, from what he described as a \u201cterrifying\u201d 11.75% to around 10.25%.<\/p>\n\n\n\n
Looking ahead, he said further reductions are possible, albeit cautiously implemented. \u201cI think the Reserve Bank\u2019s own inflation forecast and outlook show there\u2019s definitely room for more rate cuts,\u201d he said.<\/p>\n\n\n\n
However, he stressed that the Monetary Policy Committee is likely to move gradually due to global uncertainty.<\/p>\n\n\n\n
If conditions remain supportive, Odendaal said South Africans could see meaningful relief by the end of next year.<\/p>\n\n\n\n
\u201cThere\u2019s room for another two, maybe three, 25 basis point cuts from the SARB by the end of 2026, if everything goes according to plan,\u201d he said.<\/p>\n\n\n\n
Much will depend on international developments, particularly the direction of US monetary policy, the dollar, and decisions by the Federal Reserve.<\/p>\n\n\n\n
Even so, Odendaal is cautiously optimistic about the broader domestic backdrop supporting lower rates. <\/p>\n\n\n\n
He said South Africa is emerging from a \u201clost decade\u201d of sub-1% growth, with early signs of improvement becoming visible. <\/p>\n\n\n\n
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