The Reserve Bank is widely expected to cut interest rates in September, but economists are warning not to get too excited.
The South African Reserve Bank is widely expected to start cutting rates in September, but economists have warned debt holders to be realistic about what’s coming: the cycle will be slow, and likely end withStats SA’s data showed that inflation dropped from 5.1% in June to 4.6% in July – below the Bloomberg
This has led to a wave of optimism surrounding the SARB’s next meeting in September, where it is said that the “door is wide open” for interest rate cuts in the country. “A member of the SARB’s monetary policy committee would probably tell you that a lower historic inflation print does not determine forward-looking interest rate decisions, so this week’s data is not that important,” she said.IJssel de Schepper said that the data is checking all the boxes necessary for an interest rate cut—with many data points even better than expected.
“The oil price, however, remains sensitive to news from the Middle East, with hopes for a ceasefire between Hamas and Israel once again fading,” she said.However, she noted that nothing has happened to deviate from the expected slow and shallow rate-cutting cycle. Although a 50 basis point hike would not be unwarranted, the BER still has a baseline of 25 basis points.Other economists and analysts, including those from Nedbank and Standard Bank, also expect 50 basis points of cuts in 2024 and another 50 basis points in 2025.
Due to inflationary pressures, the SARB’s interest rate hiking cycle raised the repo rate by 475 basis points from 3.5% in November 2021 to 8.25%.
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