South African Reserve Bank Governor Lesetja Kganyago is mulling a further interest rate cut.
Image: Thobile Mathonsi/Independent Newspapers
The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) will be making its decision on another interest rate cut on March 20, and the recent postponement of the national Budget will play a major role in the MPC's decision.
The prospect of another interest rate cut does not look good, according to Adrian Goslett, the Chief Executive Officer of RE/MAX of Southern Africa.
He said that the budget speech debacle and the fact that the Government of National Unity (GNU) has failed to come to a consensus on increasing Value Added Tax (VAT) will influence the MPC’s decision.
Moreover, the property expert is also concerned about major geo-political uncertainties, created by President Donald Trump’s administration and how it may impact the rate cut.
He said that with the ongoing geo-political uncertainties set into motion by the Trump administration’s bullish policymaking, it remains to be seen what the SARB will do at this meeting.
Goslett did note that some positive fiscal factors may push for a rate cut in March.
“One positive is that inflation is still within the SARB's target range of 3% to 6% and below the midpoint of 4.5%,” he explained.
He also noted that the latest data showed that annual consumer price inflation was at 3.2% in January, up from 3.0% in December 2024.
Despite the 0.2% increase in inflation since December, Goslett remained hopeful of a possible further rate cut of around 0.25%.
“We are still below the midpoint target range for inflation, which makes this a good time to further stimulate the economy with another interest rate cut,” he said.
The property expert added that the impact of the previous rounds of interest rate cuts is only starting to reflect in the property market now.
“A further cut would help keep the momentum going and bolster activity within the real estate sector,” Goslett explained.
He said that SA has entered an interest rate-cutting cycle, and that means that home loans are becoming somewhat more affordable, making it more appealing to potential buyers.
“If we can keep interest rates down, the local housing market will become increasingly active and property prices will strengthen as a result.”
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In late February, S&P Global also noted that the SARB could start slowing down the pace of interest rate cuts this year and could match interest rate differentials with the US, following a recent change in its policy rate forecast for the US.
The ratings agency revised its policy rate forecasts for nine key emerging markets, including South Africa, based on the interest rate differential between emerging markets and the US, a key driver of capital flows.
Elijah Oliveros-Rosen, S&P chief economist for emerging markets, said they were now expecting just one 25 basis points rate cut from the US Federal Reserve this year, compared with three 25 basis cuts in their previous forecast.
For South Africa, S&P is forecasting one more 25 basis point cut from 7.50% to 7.25% per annum for 2025, further declining to 6.5% per annum in 2026.
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