The South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) is expected to deliver its first interest rate decision of the year on Thursday afternoon in Pretoria.

The bank last cut rates by 25-basis-points in November last year, taking the repo rate to 6.75% and the prime lending rate to 10.25%.

The Reserve Bank expects inflation to average 3.5% this year and to converge toward the new 3% inflation target next year.

Chief Economist at Investec, Annabel Bishop, says the low inflation environment makes a case for an interest rate cut, but adds that it is unclear if the bank will cut rates at this meeting.

Bishop says, “South Africa is expected to see a close decision on interest rates this week, either a 25-basis-point cut or the interest rates being left unchanged.”

She says, “Inflation is well removed from the current target of 3% with the latest outcome at 3,5% or 3,5% and coalescing at around that point for a few months now.  Inflation is not back at target and the Reserve Bank could choose caution and wait until inflation becomes entrenched at the 3% mark before cutting again. The South African economy has shown good growth.”

COST OF LIVING

The Congress of South African Trade Unions (Cosatu) is urging the bank to cut the repo rate by at least 25 basis points.

Cosatu’s Parliamentary Coordinator Matthew Parks says workers have struggled to cope with the rising costs of living, with electricity and transport prices exceeding the overall inflation rate.

Parks believes that if the repo rate is cut, it will provide comfort to millions of households and help workers pay their debts, among others.

He says, “Whilst the first phase of the two-pot pension reforms initiated by Cosatu with the support of the African National Congress  (ANC) led government has released over R 60 Billion into the pockets of nearly four million workers, reports from the National Credit Regulator paint a depressing picture of the overwhelming majority of workers remaining heavily indebted.”

“Inflation has been continuously falling and at 3.5% currently, is well within SARB’s target range. SARB has ample room to provide relief for the working class and to give the economy badly needed stimulus after a very difficult year, and the barrage of repo rate hikes since the war in Ukraine started in 2022 and international oil prices spiked. It is critical that the SARB stand with the working class and cut the repo rate by at least 25 basis points.”

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