The Monetary Policy Committee (MPC) is expected to announce on Thursday whether South Africa’s repo rate will be increased, decreased, or remain unchanged at 7.25%.
In May, the MPC opted to cut the repo rate by 25 basis points. Since then, however, inflation has edged higher, with the June figure coming in at 3%. Concerns also linger over the possible impact of looming US tariffs, raising questions about the direction the MPC will take.
Speaking to VOC News, economist Hugo Pienaar believes a rate hike is unlikely. In fact, he said the MPC is more likely to opt for a further cut, although a decision to keep the rate unchanged also remains on the table.
“I think we are either going to see the rates stay unchanged or, more likely, see another 25-basis points reduction which will take the repo rate to 7%. If correct, that would mean we’ve seen a 125-basis points reduction in the repo rate over the last year,” Pienaar explained.
South African Reserve Bank Governor Lesetja Kganyago previously cited lower-than-expected inflation as the basis for the May rate cut.
Pienaar believes the same rationale will be used again, noting that inflation remains well within the SARB’s 3% target.
“Because inflation has come in better than expected, I think we’re probably seeing more rate cuts than were anticipated a year ago,” said Pienaar.
