The Reserve Bank’s monetary policy committee (MPC) will announce its latest interest rate decision on Thursday.
The repo rate has been steady at 7.5% since January, and while inflation remains comfortably within the Bank’s 3%-6% target band the MPC’s next move is far from certain.
Economists are split on whether the Bank will use this meeting to begin loosening policy or rather remain cautious amid global uncertainty and tariff-related volatility.
FNB Wealth & Investments analyst Khumbulani Kunene expects the MPC to keep rates on hold. “While we think more cuts will come in the second half of 2025, a 25bps [basis point] cut [on Thursday], which is the consensus view, would not be too much of a surprise and would suggest that local fundamentals outweighed external headwinds,” he said.
The Bank held steady in March despite a favourable inflation environment, citing concerns about geopolitical instability, US trade uncertainty and rand vulnerability.
“On the global front, we are in a better position than during the March MPC when the US President Donald Trump’s ‘Liberation Day’ was looming and we were anticipating the announcement of reciprocal tariffs,” he said.
However, Kunene noted FNB still believed “that persistent policy uncertainty will continue to push monetary authorities to err on the side of caution”.
Nedbank economists said “the decision hinges on how much weight the [MPC] places on recent price dynamics relative to potential upside risks posed to the inflation outlook by a highly unpredictable global environment”.
“If the focus falls on the underlying price dynamics, a strong case can be made for further rate cuts,” they said.
Chief economist at the Bureau for Economic Research (BER), Lisette IJssel de Schepper, said the Bank is likely to engage in “lively discussions” this week “and it is unlikely to be a unanimous decision”.
“While a strong case can be made for further easing ... we believe the [Bank] may again err on the side of caution and keep its rate unchanged.”
The Bank is also reviewing its inflation target. This could not only help anchor expectations more firmly, but also justify keeping interest rates higher for longer.
Bank deputy governor Fundi Tshazibana told journalists at a budget briefing on Wednesday the feedback it had received was the current target range of 3%-6% was “too wide and out of line with that of our trading partners”.
Technical teams had completed their analysis and were now at the point of making formal recommendations, she said.
On Thursday, Stats SA will publish producer inflation index (PPI) figures for April. Most economists expect the annual PPI rate to remain subdued.
Nedbank projects 0.5% year on year, unchanged from March, while the BER sees a further slowdown to just 0.1% year on year, largely due to April’s fuel price declines.
On Friday, the Reserve Bank will release its usual monthly information, including private sector credit extension (PSCE) data for April.
Private sector credit slowed to 3.5% year on year in March, dragged down by a sharp moderation in corporate credit demand. Nedbank expects annualised private sector credit to rise modestly to 3.8%, with household credit improving slightly to 3% and corporate loans rebounding to 6.2% year on year due to lingering base effects.
Also on Friday, the SA Revenue Service will release trade balance data for April.
March recorded a surplus of R24.8bn, supported by strong export growth. For April, Nedbank expects the trade surplus to narrow to R20bn, as exports softened.
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