The South African Reserve Bank (SARB) has initiated its first interest rate cut since 2020, reducing the repo rate by 25 basis points to 8%. This move follows a 50 basis point cut by the US Federal Reserve, sparking divided opinions among economists about the SARB’s future path. While factors such as a stronger rand, softer oil prices, and slowing inflation, which dipped below the midpoint of SARB’s 3%-6% target range, supported the decision, forecasts vary significantly.

Goldman Sachs anticipates a bold 150 basis points cut, projecting the repo rate to reach 6.5% by front-loading rate reductions. In contrast, Standard Bank expects a more gradual 75 basis points cut to 7.25%, while Nedbank forecasts a quarter-point reduction in November, followed by a cumulative 100 basis points over the next year. Economists at Foord Asset Management predict a shallow easing cycle, with a high threshold for aggressive cuts due to concerns about keeping the spread between US and South African rates manageable.

SARB’s model-based forecast suggests the policy rate will reach 7.17% by the end of 2024, with inflation slowing to 4% by 2025. However, economists remain cautious, citing global uncertainties, geopolitical risks, and domestic electricity prices as potential inflationary pressures. Governor Lesetja Kganyago emphasised a cautious approach to monetary policy, stating that “adventurism is not part of our toolkit,” reflecting the SARB’s preference for a measured easing cycle rather than bold rate cuts.