What to Expect from South Africa’s Interest Rates This January

The South African Reserve Bank (SARB) is set to announce its first interest rate decision of 2025 on 30 January, and the outlook is cautiously optimistic for a 25 basis point (bp) cut in the repo rate. This follows a year of easing inflation and slow but steady rate cuts in 2024.

Inflation Trends

Consumer inflation has eased below SARB’s target range of 3%-6%, boosting expectations for further rate cuts. However, global factors, including the impact of the US presidential election and policy uncertainty under Donald Trump’s administration, have complicated projections.

The rand’s recent performance has added another layer of complexity. Starting the year at R18.78/$, it weakened further to R19.23/$ due to stronger US economic data and diminished expectations for US rate cuts.

Expected Rate Cuts for 2025

Economists, including those at Investec, anticipate a total of 75bp cuts in 2025, with the first 25bp cut likely in January or March. Under this scenario, the repo rate could reach 7.00% by year-end, assuming no adverse economic shocks.

However, some factors could delay or even reverse the easing cycle:

• Volatility in global oil prices, affecting local fuel costs and inflation.
• A weaker rand, driven by US policies and market sensitivity to Trump’s administration.
• SARB’s cautious stance amid economic uncertainty.

Analyst Perspectives

Adrian Goslett, CEO of RE/MAX Southern Africa, noted that SARB has taken a conservative approach to rate adjustments. Despite optimism for timely cuts, past decisions have “fallen short of expectations.”

Annabel Bishop, chief economist at Investec, emphasized the impact of global dynamics, including the US Federal Reserve’s rate stance. With the Fed unlikely to cut rates soon, SARB might delay further cuts to maintain the interest rate differential and protect the rand.

Key Dates

• 20 January 2025: US Federal Reserve meeting—no rate cuts expected.
• 30 January 2025: SARB MPC announcement, with a 25bp cut being the most likely outcome.

While a rate cut is anticipated at the upcoming SARB meeting, global economic uncertainty and local currency performance will heavily influence the decision. South African consumers should prepare for a cautious easing cycle as SARB navigates these challenges.

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