(Reuters) – South Africa’s Reserve Bank is expected to cut interest rates for the first time in more than two years – by 25 basis points to 8.00% – on Sept. 19, according to a Reuters poll of economists who had similar views to a poll taken last month.
A repo rate cut would follow a period of tight monetary policy in Africa’s second-largest economy aimed at reducing inflation, which slowed to 5.1% in June.
That expected rate reduction would come one day after the U.S. Federal Reserve is widely expected to start its cutting cycle after holding the federal funds rate steady over the past year.
The SARB’s Monetary Policy Committee was split at the July meeting for the first time since September 2023, with four members preferring to keep rates on hold and two favouring a 25-basis-point cut.
Nineteen of 26 economists surveyed between Aug. 6-14 said the SARB will trim its main repo rate by 25 bps to 8.00% on Sept. 19. A majority also said it will cut again by the same amount in November to 7.75%.
Two more 25-basis-point cuts are expected in the first quarter of nest year – with meetings due in January and March – according to median forecasts from the poll, followed by another in May before the Bank pauses at 7.25% for the remainder of the year.
Only one further cut to 7.00% is expected in 2026, based on a smaller sample of forecasters.
David Omojomolo, Africa economist at Capital Economics, wrote in a note that the economic recovery in South Africa is operating at two speeds, with retail sales and manufacturing on the up but the important mining sector stuck in a weak spot.
“Nonetheless, with easing electricity shortages and interest rate cuts on the way, the economy is finally turning a corner. We expect further modest growth over the rest of this year and in 2025,” he added.
Power shortages from the state utility have crimped growth in Africa’s most industrialized nation in recent years, making planning and job creation difficult for small businesses.
Economic growth in South Africa is expected to be 0.9% this year and 1.6% in 2025, a 0.1 percentage point downward revision for both years compared with the July survey.
South Africa’s unemployment rate rose to 33.5% in the second quarter of 2024 from 32.9% in the first quarter.
Inflation was expected to slow to an average of 4.9% this year and 4.5% in 2025, from 5.1% in June, similar to the previous poll.
Among major central banks, the European Central Bank is expected to cut its deposit rate twice more this year after a reduction in June, in both September and December.
The SARB’s southwestern Africa peer in Namibia cut its main interest rate by 25 basis points on Wednesday, while Zambia’s central bank held rates steady due to the inflationary impact on the economy from drought.
(Other stories from the Reuters global economic poll)
Source: Economy - investing.com
