The South African Reserve Bank (SARB) is expected to cut its repo rate by 25 basis points to 7.50% on January 30, with a further 25 basis points cut in March, according to a Reuters poll of 19 economists. However, the majority of economists predict that the final 25 basis point cut of the cycle will be delayed until the third quarter.
The forecast comes as the SARB waits for clarification on the policies of the new Trump administration in the United States, including proposed tariffs and other trade policies. Many economists believe that Trump’s policies will be inflationary, leading to a slowing of interest rate cuts by the SARB.
The rand weakened on Monday after Trump’s inauguration, and inflation in South Africa rose for the second month in a row in December, averaging 3.0% year-on-year. However, economists expect inflation to average 4.1% this year and quicken to 4.5% next year.
The South African economy is expected to grow 1.7% this year and 1.9% next year, driven by improvements in the macroeconomic backdrop and the fading of challenges such as load-shedding and logistics constraints. Capital Economics was the most bullish on growth, forecasting 2.3% for South Africa this year.
