South Africa: SARB extends loosening cycle in January
Cut matches market expectations: At its first meeting of 2025 on 30 January, the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) decided to reduce the repurchase rate by 25 basis points to 7.50%. The cut was the third quarter-point reduction in a row and had largely been priced in by markets. The decision was not unanimous: Two of the MPC’s six members preferred to hold rates steady.
Weak Q3 GDP data supports cut: The cut was driven by sluggish economic activity and a decline in inflation in 2024. Moreover, the 2025 inflation outlook improved: The SARB cut both its headline and core inflation forecasts by 0.1 percentage points to 3.9% and 3.8%, respectively. Meanwhile, it kept inflation forecasts for 2026 and 2027 unchanged; all six metrics hover within the SARB’s 3.0–6.0% target band, suggesting that price pressures will remain contained ahead. That said, the Bank assessed risks to the inflationary outlook to now be skewed to the upside—instead of balanced as in its last meeting.
More cuts on the table for 2025: The SARB did not provide forward guidance on the future path of interest rates. The next meeting is set for 20 March, and our panelists are split regarding the SARB’s next move: A slight majority expect it to pause its loosening cycle, while almost all of the rest anticipate another 25 basis point reduction. Overall in 2025, our Consensus is for around 75 basis points of additional cuts by the end of the year.