Experts remain divided on potential interest rate cut as consumer inflation falls to 2.7%

As South African households continue to grapple with relentless financial pressure, the upcoming Monetary Policy Committee (MPC) meeting has sparked intense debate on whether the South African Reserve Bank (Sarb) will implement an interest rate cut.

With inflation plummeting to 2.7% in March—its lowest point since 2020—economists and debt experts find themselves at a crossroads, oscillating between cautious optimism and prudent scepticism.

Neil Roets, CEO of Debt Rescue, on Monday acknowledged the necessity for an open dialogue regarding possible interest rate reductions.

“While we welcome the conversation—and any form of relief—we remain deeply concerned about the unrelenting financial pressure facing South African consumers,” he said.

Roets highlighted the paradox of low inflation against the backdrop of a soaring repo rate, which stands at 7.5%.

In his view, even if the Sarb were to enact a reduction of 25 or 50 basis points, it would barely alleviate the ongoing cost-of-living crisis experienced across the nation.

He said consumers were buckling under the weight of rising food prices, yet another electricity price hike in April, and unaffordable debt repayments.

“Our April 2025 survey confirmed that more South Africans are relying on short-term credit just to survive. The need for relief is urgent. While we understand the Sarb’s cautious, data-dependent approach—especially amid global uncertainty—this cannot come at the expense of people’s basic survival,” he said.

Roets added that monetary policy alone won’t fix everything, but decisive action would help ease the debt burden and inject desperately needed confidence back into the economy.

Benay Sager, executive head of DebtBusters, expressed optimism about the conditions that might permit a rate cut. However, he shares a belief that the Sarb will ultimately opt for caution, likely maintaining the current rate.

“If the interest rate does change downwards, it will be good for consumers as it will allow a bit more breathing room. If it stays the same, our recommendation to consumers would be to continue servicing their debt and payments, and to continue to look for ways to stretch their money as much as possible,” he said.

“If it stays the same, we think it would be driven mostly by global macroeconomic situations, as opposed to anything happening locally in South Africa.”

Despite mixed sentiments, some analysts are holding out hope for a relief measure.

Economist Casey Sprake from Anchor Capital said that falling oil prices—thanks to OPEC increasing production—could trigger a 25 basis point interest rate cut in the imminent MPC meeting.

“While the next move by the cartel remains difficult to predict, the current lower oil price environment is clearly beneficial for South Africa. Given oil's significant weighting in the inflation basket, we expect headline inflation to remain subdued in the near term, providing some breathing room for monetary policy,” Sprake said.

“As a result, we anticipate a 25 basis point interest rate cut at the upcoming Monetary Policy Committee (MPC) meeting in late May, followed by an additional cut at the subsequent meeting. However, from July onwards, we expect inflation to begin edging higher again, largely due to base effects.”

Sprake said the potential for more aggressive easing by major central banks, particularly the US Federal Reserve and the European Central Bank, increased the likelihood that South Africa may be compelled to follow suit—especially in a scenario of weakening global growth and heightened capital flow volatility.

“Should this unfold, it would raise the probability of a deeper and earlier rate-cutting cycle from the Sarb,” she said

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