With inflation coming in better than expected in July, many economists and analysts believe that interest rate cuts are around the corner.
Better-than-expected inflation numbers mean that a cut in interest rates looks certain for September.
The South African Reserve Bank started hiking interest rates in late 2021 as inflation rose. The repo rate is currently at a 15-year high of 8.25%.“Economists were surprised by lower contributions from core goods/services, alcohol/tobacco, and water and electricity,” said Ruan Yacumakis, Quantitative Analyst at Prescient Investment Management.
Investec also believes that the first interest rate cut of the year will be in September, with the MPC cutting the repo rate by 25 basis points. Before the better-than-expected July inflation data, several financial institutions and economists, including Nedbank, Bank of America, Standard Bank, and the Bureau for Economic Research, also believed that the Repo rate would be cut.
This would also help the embattled automotive sector, as lower borrowing costs could stimulate demand, encouraging more consumers to purchase vehicles. Businesses relying on fleet vehicles would benefit from reduced operating costs due to lower fuel prices and more favourable financing terms.
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