Economists expect MPC to pause easing of repo rate due to higher inflation expectations, VAT hike

JOHANNESBURG - All eyes are on the Reserve Bank’s Monetary Policy Committee (MPC) this week as it mulls its next move on policy rates.

The central bank’s MPC is expected to announce changes to the repo rate on Thursday.

The announcement comes on the back of two major releases this week, including inflation expectations by the Bureau for Economic Research on Tuesday and consumer price inflation by Stats SA on Wednesday.

A key gauge on inflation expectations for the next two years rose slightly this week, with the forecast now up to 4.7% through 2027.

But expectations for this year fell to 4.3% from 4.5%.

So far in 2025, for the two months reported by Stats SA, annual consumer price inflation has been subdued at 3.2% for January and February.

Added to the already higher inflation expectations in the medium term, the recent VAT increase is also expected to push the inflation rate up on the domestic front.

The tariff wars triggered by US President Donald Trump could also pile pressure on the global front.

Some analysts believe this combination of factors could put a dampener on the recent policy rate easing cycle.

Economists already believe the MPC will hold the repo rate at the current 7.5% on Thursday.