Interest rate cut possibility looms over South Africa as MPC meeting approaches

Debt experts and economists are gearing up for what could be a pivotal moment at the end of July as South Africa's monetary landscape evolves.

The highly anticipated meeting of the Monetary Policy Committee (MPC) of the South African Reserve Bank (Sarb) may see a further reduction in interest rates, offering hope to beleaguered consumers grappling with escalating costs and economic uncertainty.

Casey Sprake, economist at Anchor, on Monday said the interest rate outlook continued to tilt dovish, with markets now pricing in a 66% chance of another 25 basis points cut.

“While the pace has been more gradual and staggered than initially anticipated—particularly following the last rate hike exactly two years ago—the Sarb's cautious approach has still delivered meaningful relief to highly indebted households,” she said.

Sprake added that with inflation subdued, economic growth under strain, and real rates remaining restrictive, the door remains open for additional monetary support into 2025.

Benay Sager, executive head of DebtBusters, was similarly optimistic about another cut later this month based on the slow rate of consumer inflation. 

“Most of the other indicators also look likely to support an interest rate cut, which will be great for consumers. As reported by Stats SA, inflation has been lower than the last few years for a few months now, and I think that is the main reason to support interest rate cuts," he said.

"The Reserve Bank already indicated in the last meeting in May that they would like to permanently move the target band of the interest rate lower, so those are perhaps also reasons to support an interest rate cut.”

Professor Raymond Parsons, a North-West University Business School economist, acknowledged that both global and domestic data warrant continued easing of interest rates.

“The question is whether the MPC will do so this month or only at its September meeting. The timing of a further cut in borrowing costs will therefore be driven by the MPC’s assessment of continued low inflation well within its inflation target range, the weaker economic growth outlook, as also the impact on the SA economy of the pending Trump tariff decisions this week,” Parsons said.

Old Mutual chief economist, Johann Els, concurred that the underlying trends in the inflation indicated there will be a 25 basis points rate cut by majority decision.

"I don’t think there’s a possibility of a 50 basis point increase, and given that the Sarb is going to possibly revise its inflation target, I expect that this will be the last interest rate cut for the year. The Sarb will probably hold interest rates unchanged for the last two meetings,” Els said.

However, Debt Rescue CEO, Neil Roets, said predicting what the Sarb will do later this month is not straightforward.

Roets added that constant price increases on essential goods mean that families are focused not on saving, but simply on surviving, with food inflation alone sitting at 4.8% in May and contributing nearly a full percentage point to overall headline inflation.

He said that the upcoming Consumer Price Index (CPI) release on 23 July will also likely influence the Sarb’s final decision.

“Any upward movement in inflation, particularly driven by fuel or food costs, could reinforce a more conservative stance. The Reserve Bank’s primary responsibility is price stability, and it will not want to cut too soon—risking a resurgence of inflation driven by global volatility or a weakening currency," Roets said.

"While another cut would certainly offer relief to consumers, especially the over-indebted, we must prepare for the possibility that the Sarb may hold back in July.”

BUSINESS REPORT