Economists expect a 25 basis point (bps) cut in the repo rate, taking it to 7.5% this week, but they differ on when the next cut is likely to occur.
This is as the SA Reserve Bank takes centre stage with its monetary policy committee (MPC) meeting on Thursday.
Investec chief economist Annabel Bishop noted that the pace of rate cuts is likely to slow after two successive reductions in late 2024, projecting “no cut at the March MPC meeting” and “the Bank is not expected to ease interest rates again until July at least”.
Nedbank economists foresee two additional 25 bps reductions in 2025, with the second likely to occur in March.
“This aligns with the November estimates of the Bank’s quarterly projection model, which also pointed to reductions of about 50 bps in 2025,” they said.
Lisette IJssel de Schepper from the Bureau for Economic Research said a further 25 bps cut after January is possible, “but we are less convinced of this than before and think a further 25 bps cut [that is a third cut this year] is unlikely as the Bank seems to place significant emphasis on the upside risks to inflation.”
Tatonga Rusike, Sub-Saharan Africa Economist at Bank of America Global Research, said that beyond January, “global risks will probably come to the fore” and they thus no longer expect a rate cut in March.
On Tuesday, Stats SA will publish the Income and Expenditure Survey (IES) for 2022/23, a vital data set that provides insights into household consumption patterns, income streams and living conditions.
The survey’s findings play a crucial role in assessing and tracking poverty levels across the country.
Additionally, the results will guide adjustments to the consumer price index (CPI) basket, with the updated weights and classifications set to take effect in the January 2025 CPI release.
On Thursday, Stats SA will also publish the latest producer price inflation (PPI) data.
In November, PPI remained in deflationary territory, recording a 0.1% year-on-year contraction after a 0.7% decline in October.
Globally, monetary policy will dominate the week.
The first decision comes on Wednesday afternoon, when the Bank of Canada is widely expected to cut its policy rate by 25 bps, IJssel de Schepper said.
The US Federal Reserve is expected to hold rates steady after a December cut, while the European Central Bank is projected to lower its policy rate on Thursday.
In emerging markets, Brazil has adopted a contrasting approach, hiking rates in response to inflationary pressures.
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