Economist expects SARB's MPC to cut repo rate by 25 basis points

JOHANNESBURG - The South African Reserve Bank (SARB)’s Monetary Policy Committee (MPC) is set to wrap up its penultimate meeting on policy rates on Thursday, as consumers wait with bated breath on the repo rate decision.

The MPC met this week amid increasing pressure to cut the repo rate from its current 15-year high of 8.25%.

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Wednesday’s announcement by Statistics South Africa (Stats SA) that inflation had dipped to 4.4% in August, from 4.6% in July, has renewed hope from some analysts that the MPC will finally cut rates.

Borrowing costs have surged 475 basis points since November 2021, putting pressure on indebted consumers and the economy.

Economists are now betting on a marginal cut by the reserve bank’s MPC.

Some economists believe a stronger rand against the dollar post the general elections, cooler global inflation, and the United States (US) Federal Reserve (Fed)’s decision to cut the Fed rate are all likely to spur the MPC to start its rate-cutting cycle.

An economist at Sanlam Investments, Patrick Buthelezi, said: “We expect the MPC to start the rate-cutting cycle by at least 25 basis points.”

While the MPC has forecast inflation to continue easing in the final quarter of 2024, the central bank has warned there are still some upside risks.