Economists broadly expect the Reserve Bank to cut the repo rate by 25 basis points (bps) at Thursday’s monetary policy committee (MPC) meeting, though caution remains high amid external risks.
“The July cut will likely mark the end of the current easing phase,” said Johann Els, chief economist at Old Mutual.
“Interest rates are expected to remain broadly unchanged thereafter, with the cutting cycle anticipated to resume in 2027, as inflation gradually converges towards the ‘new’ lower 3% target — expected to be formally announced before year end.”
Lisette IJssel de Schepper from the Bureau for Economic Research (BER) in Stellenbosch said: “We expect the [Bank] to cut by another 25 bps, though there is a slight chance the MPC decides to keep rates on hold.”
She added that markets will also be watching for updates on the 3% inflation target scenario previously tabled in May.
Khumbulani Kunene, Investment Analyst at FNB Wealth & Investment, described the decision as “a tight one to call given the volatility and uncertainty that has plagued 2025”, noting that “pronounced caution is also reflected in the very shallow yet protracted cutting cycle”.
“The direction of travel appeared less uncertain in January when the MPC delivered its third 25bps cut and continued a cutting cycle that followed a relatively aggressive hiking campaign since the adoption of inflation targeting,” he said.
“However, it became evident at the March meeting that global headwinds would force monetary policy to be more cautious than what has already been tradition.”
Kunene said that while there was room for a July cut, “we think the MPC will keep rates unchanged at the July meeting”.
Annabel Bishop of Investec said: “While SA can have an interest rate cut at each remaining MPC meeting this year on inflation expectation of 4.0% year on year over the forecast period, the Bank is likely to be cautious on the uncertainty around tariffs.”
Adding further complexity to the Bank’s decision is Friday’s expected implementation of reciprocal tariffs by the US.
“However, [US President Donald] Trump may once again Taco [Trump always chickens out], though some analysts now argue that the world may chicken out this time by not stepping up the retaliation, but merely accept what has been offered,” IJssel de Schepper said.
SA remains in talks, aiming to reduce the proposed 30% tariff ahead of the looming deadline.
The outcome of US court deliberations on Thursday, assessing whether Trump is legally allowed to impose discretionary tariffs under the US’s International Emergency Economic Powers Act, could also influence sentiment, IJssel de Schepper noted.
Meanwhile, the week is dense with local data. June’s private sector credit extension (PSCE) and producer price index (PPI) will be released on Tuesday and Thursday respectively.
PSCE growth picked up to 5.0% year on year in May, driven by corporate credit demand, while the PPI fell to just 0.1% year on year in May, reflecting muted upstream inflation pressures.
Also on Thursday, the SA Revenue Service is to release trade balance data for June. In May, the surplus widened to R21.7bn, with strong export performance in gold and citrus offsetting modest import growth.
Friday brings the Absa manufacturing purchasing managers’ index (PMI) and automotive body Naamsa’s new vehicle sales for July.
The PMI rebounded sharply in June to 48.5, its strongest monthly gain since September 2024, though it remained below the neutral 50 level. New sales orders were boosted by domestic demand, and confidence held steady.
“The manufacturing PMI showed some flicker of a recovery in June, so it will be interesting to see how this developed through July,” IJssel de Schepper said. “The rate of increase in new vehicle sales has slowed, but remained solid in June, with especially cars at the lower end of the market doing well through 2025 so far.”
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