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Even though the rate of increase in the cost of living declined by 0.5 percentage points year-on-year in March – beating expectations – the Reserve Bank will remain cautious about cutting interest rates next month due to current geopolitical tensions.

Yet, the central bank may see room to start cutting rates marginally from around the middle of the year, according to Old Mutual’s chief economist, Johann Els.

Els said that the Consumer Price Index (CPI) surprised on the downside, coming in at 2.7% in March instead of his anticipated 3%. The February figure was 3.2%. “So, significantly lower than expected by me, anybody out there in the market, and by the Reserve Bank,” he said.

Elna Moolman, Standard Bank Group Head of South Africa Macroeconomic Research, said that inflationary pressure remains quite benign, vindicating the Reserve Bank’s decision to cut rates last year. However, she said it doesn’t remove all the Bank’s concerns about medium-term upside pressure on inflation given global tariff concerns.

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Despite the welcome number, Els believes that the South African Reserve Bank will be cautious at the next Monetary Policy Meeting (MPC) on May 8, when they consider interest rate cuts. This, he explained, is given all the global uncertainty created by Trump’s tariff positioning now.

“I think the Reserve Bank will welcome these lower numbers, but they will keep rates unchanged at their next MPC meeting, given all the global uncertainty at the moment,” Els said.

However, Els does see room for the Reserve Bank to cut rates around July again. “For the moment, I think there's going to be one more 25 basis point rate cut, but there might be room for two 25 basis point rate cuts, given the low trajectory of inflation over the next few months.”

Els explained that “the lower-than-expected March number means that, during the second quarter, the April, May, and June numbers could be around 2.5%. Lower than what I previously expected, an