Some economists believe there’s room for continued easing of monetary policy

Some economists believe there is room for continued easing of monetary policy after the South African Reserve Bank (SARB)’s Monetary Policy Committee (MPC) cut the repo rate by 25 basis points.

In line with some market expectations, the MPC decided unanimously to lower the benchmark rate to 6.75% in the final meeting of 2025 on Thursday.

This brings the prime lending rate for commercial banks to 10.25%.

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The 25-basis point cut to the repo rate comes amid improved economic sentiment, supported by an overshoot in revenue, an S&P credit rating upgrade and South Africa’s exit from the grey list.

A further ease in borrowing costs is expected to push confidence and willingness to spend in the right direction.

Economist and product head at FNB, Ester Ochse said, “However, we do recommend that if the budget allows, keep paying the previous higher instalment as this will assist with saving interest over the longer term.

“If, however, the consumer is relying on interest income from savings, this will potentially reduce as well, and there they will need to see where they can adapt their budget to see how they can make up any potential shortfall."

That said, economists at FNB said the MPC remains focused on future inflation, with a lower likelihood of aggressive cuts in the near term.

“The exact level of the further monetary policy restriction is debatable, but a speedy adoption of the new target and anchoring of expectations will be less costly to economic growth,” said Mamello Matikinca-Ngwenya, FNB chief economist.

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