The South African Reserve Bank’s (SARB) first interest rate cut since 2020, a 25 basis point reduction to 8%, has sparked varied opinions among economists. This move, supported by the strength of the rand, lower oil prices, and inflation dipping below the midpoint of SARB’s target range, sets the stage for further easing. However, predictions on the extent of future cuts differ significantly.

Goldman Sachs anticipates a bold 150 basis point cumulative cut, expecting a “front-loaded” approach as inflation surprises to the downside and the rand strengthens. In contrast, Standard Bank foresees a more cautious 75 basis point reduction, with a shallow easing cycle expected. Bloomberg Economics projects two 25 basis point cuts by May 2025, bringing the rate to 7.5%, while Nedbank predicts a quarter-point reduction in November and another cumulative 100 basis points next year.

Despite these divergent forecasts, SARB Governor Lesetja Kganyago has maintained a cautious stance, rejecting calls for bolder cuts, stating that “adventurism is not part of our monetary policy toolkit.” The SARB’s model-based forecast sees the policy rate declining to 7.17% by the end of 2024, with inflation expected to slow to 4% by 2025.

Economists from firms like Barclays and Momentum Investment Group predict gradual easing, with the benchmark rate reaching 7.25% by 2025. However, uncertainties surrounding geopolitical risks and domestic challenges, such as electricity prices, caution against aggressive monetary policy moves.