South Africa has cut its interest rates by 1.50 percentage points since September 2024. The current prime lending rate is 10.5%. A stronger rand combined with cheaper borrowing costs is giving households and businesses some much-needed relief and could lead to interest rate cuts.
According to Annabel Bishop, chief economist at Investec, the South African Reserve Bank may cut interest rates twice this year. Only one 0.25 percentage point cut in the repo rate is fully factored in by financial markets for South Africa this year, expected in March. A second, at the same level that could come through in September, is only partially factored in, which has supported investor sentiment towards the rand further, Bishop said.
“Next year, there are no definite market expectations for another interest rate cut in South Africa,” Bishop said. Johann Els, chief economist at PSG Financial Services, said “I think the Reserve Bank is in a position where they can continue to cut rates, and I expect two more rate cuts in the first half of 2026”. Els added thatinflation is likely to settleat around 3.2% on average for 2025 and may see a slight increase to 3.6% this year.
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Inflation is generally being kept in control by decent trends in food prices with very good rainfall, expected good maize crop, and the end of price impacts in terms of the foot and mouth disease that impacted meat prices, said Els. Bishop also noted that therand’s recent strength against the US dollaris very beneficial for inflation as it will aid in lowering price pressure on fuel and food. Els expects the economy to grow modestly in 2026, with further improvement possible in 2027.
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