Reserve Bank’s third rate cut in a row: What it means going forward

Source: Lesetja Kganyago/X

Dr Elna Moolman, Standard Bank Group Head of South Africa Macroeconomic Research welcomed the 25 basis point cut by the South African Reserve Bank (Sarb) Monetary Policy Committee (MPC) after its first meeting for the year.

The Reserve Bank's decision was exactly in line with our longstanding forecasts, she said.

"This reflects the currently benign inflation pressure, as well as the expectation that inflation should remain around the mid-point of the Reserve Bank's target range in the medium to long term."

She noted that the Reserve Bank is understandably concerned about the risks to the inflation forecast.

"It probably tried to guard against the expectation that there will automatically be rate cuts at every meeting. Essentially, the MPC signalled that further interest rate cuts will depend on how the inflation forecast risks unfold," she said.

"This relief, combined with the interest rate cuts last year, will provide some support for the South African economy in the year ahead, and we expect a notable improvement in economic growth this year compared to last year."

Property market outlook

Chris Tyson, chief executive officer of national real estate agency, Tyson Properties echoed Moolman's sentiments. He remains certain that further rates cuts are still to follow despite a slight uptick in the inflation rate to 3% in December (which remains below the Sarb's benchmark 4.5%) and global economic policy uncertainty in the wake of US President Donald Trump’s re-election.

"I am confident that this latest cut is good news for the property market," he said. "Interest rate cuts by the Sarb are beginning to add up to some meaningful relief for South African home owners. As a result, Tyson Properties is positioning itself for a more buoyant market during 2025 and expects a recovery in key regions such as Gauteng and KwaZulu-Natal, while the Cape property market continues to perform."

Although Tyson believes that the Sarb will continue along the ultra-cautious trajectory that saw repeated decisions to maintain the repo rate unchanged at a 15-year high of 8.25% until September 2024, he believes there is a strong chance that the interest rate might ultimately drop to around 7%.

"This will give both buyers and sellers waiting out the 2024 interest-rate plateau more confidence to enter the property market," he said.

Market stabilisation expected

"Even if the Sarb begins to hold rates once more at a lower point, this should provide the property market with some stability and predictability which would entice those contemplating longer term investments to look to buying properties."

Kganyago added, "Core inflation is expected to remain at or below the midpoint throughout the forecast period."

He made his announcement on Thursday, 30 January, 2025.