Economists predicting series of interest rate cuts

Economists expect a series of interest rate cuts from the South African Reserve Bank starting from today.

Investec Chief Economist Annabel Bishop says she expects the bank to cut rates by a minimum of 25 basis points.

Rates remain at their highest level in 15 years with the repo currently at 8.25% and prime lending at 11.75%.

Data from Stats SA this week’s Stats SA data showed that consumer price inflation (CPI) fell further from 4.6% in July to 4.4% in August 2024.

Bishop says this puts the index below the bank’s 4.5% mid-point target, creating room for the bank to loosen its monetary policy in a low growth environment.

“We’re expecting a 25 basis point, that’s a quarter of a percent drop and of course, that will happen at the September Monetary Policy Committee meeting. We don’t believe this will be the only cut. We believe South Africa is now entering an interest rate cutting cycle, it will certainly stretch over the course of next year and into 2026.”

Annual consumer price #inflation declined to 4,4% in August from 4,6% in July. This is the lowest inflation print since April 2021.

Listen here for more: https://t.co/LBDlSkP770#CPI #StatsSA pic.twitter.com/Ibb3f1qZJJ

— Stats SA (@StatsSA) September 18, 2024

Meanwhile, economic analyst Bonke Dumisa says the cut is likely following the US Federal Reserve’s decision to cut its lending rate.

Dumisa says, “After listening to the announcement by the US, they cut their repo rate by 50 basis points and South Africa always takes from the US. So, as it is now, I am saying it is highly likely that the South African Reserve Bank will cut the repo rate by 50 basis points as well. However, let us not push the hopes of people in case they are conservative, and they cut it by only 25 basis points.”

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