SARB cuts rates by another 25 basis points in November

Cautious monetary policy easing continues: At its final meeting of 2024 on 21 November, the monetary policy committee of the South African Reserve Bank (SARB) unanimously decided to reduce the repurchase rate by 25 basis points to 7.75%. The cut followed September’s same-sized reduction and had been priced in by markets.

Inflation fell below target in October: The SARB’s decision to cut rates again was driven by inflation cooling more than expected in October to below the lower bound of the SARB’s 3.0–6.0% target range for the first time since February 2021. Regarding the inflationary outlook, the SARB’s inflation forecasts were stable for 2025 and 0.2 percentage points higher for 2026; still, both metrics, as well as core price pressures, are seen remaining within the Bank’s target band. The Bank assessed risks to the inflation and growth outlooks to be balanced, and deemed the cut consistent with achieving the inflation target. Regarding activity, the Bank kept its 2024 and 2026 GDP growth forecasts unchanged at 1.1% and 1.8%, respectively, and upped its projection for 2025 by 0.1 percentage point to 1.7%.

SARB still says rates to settle just above 7%: The SARB’s forward guidance continued to suggest that the Bank will continue to cut the repurchase rate until slightly above 7%. Still, the Bank reiterated that decisions will remain data-dependent and conditional on the balance of risks to the inflation outlook. Our panelists see 50–200 basis points worth of cuts in 2025. The next meeting is scheduled for 30 January 2025.

Panelist insight: EIU analysts said: “The interest-rate cut leaves interest rates a long way above the rate of consumer price inflation. There are likely therefore to be a series of interest-rate cuts over the forecast period. This forms part of our forecast that real GDP growth will climb to 2.6% in 2025 (this is well above the SARB's forecast of 1.7%). Global economic uncertainty and the depreciation of the rand since the US presidential election in early November pose risks to the forecast and are likely to ensure the SARB moves cautiously.”

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