Business Reporter.
The benchmark repo rate of the South African Reserve Bank (Sarb) is currently at 7.75%, but Bloomberg Economics forecasts the rate to be at 7.25% by the end of 2025.
Inflation has remained below the mid-point of the Sarb’s 3%-6% target range since August, giving policymakers scope to continue lowering borrowing costs in 2025, it says.
The bank has eased rates by a cumulative 50 basis points since September, after holding the benchmark rate at 8.25% for more than a year.
Governor Lesetja Kganyago acknowledges that pricing pressures have eased, but warns that Donald Trump’s election may create upside risks.
The Sarb will take decisions on a meeting-by-meeting basis and won’t pre-commit to any specific rate path, he says.
The central bank’s modeling shows the key rate stabilising at slightly higher than 7% by the end of 2025. Inflation is seen averaging 4% in 2025.
“Lower-than-anticipated inflation gives the Sarb room to cut rates by 50 basis points to 7.25% by March, close to the neutral rate. It will then pause. The narrowing of the output gap to zero over the central bank’s forecast period through 2027 supports halting cuts soon, “says Yvonne Mhango, Africa economist at Bloomberg Economics.
“In 1Q25, inflation may be sticky in the lower band of the Sarb’s 3%-6% target. It may then rise to the 4.5% mid-point by 4Q25 and stay there through 2026, “adds Mhango.
Source: Bloomberg.