Investors and the broader public, including anyone with debt - including home loans, vehicle loans and credit cards, have been waiting with baited anticipation and are expecting the SA Reserve Bank’s Monetary Policy Committee (MPC) to cut interest rates in South Africa on Thursday.
The committee is expected to announce an interest rate cut on Thursday at 3pm.
Many industry experts expect the interest rates to be cut, bringing much needed reprieve for strained consumers.
Experts think there will be a cut!
The repo rate is currently at a 14-year high of 8.25% and the prime lending rate is at 11.75%.
A number of experts have said that the SARB will cut the interest rate in September by at least 25 basis points (bps).
Old Mutual’s group chief economist Johann Els said expectations are mounting for an interest rate cut.
Els argued that the SARB would have room to cut rates at both of its remaining meetings for 2024, on September 19 and November.
“I expect interest rates to be cut, perhaps more than expected by the market,” he emphasised.
The economist said the Reserve Bank has successfully brought inflation within its target range, and with global pressures, particularly from the US, starting to ease, the path for a rate cut seems clear.
Absa’s SA macroeconomics team said on Monday that they were expecting a 25bps cut.
"Our view is in line with the Thomson Reuters consensus, with 18 of the 21 analysts (including Absa Research) polled last week calling for a 25bps cut while the remaining 3 expecting no change,“ Absa said.
“We believe that the case for a cut has strengthened since the July Monetary Policy Committee when the committee voted 4:2 (with 2 supporting a 25bps cut) in favour of a hold,” the bank added.
Inflation is down and the US Federal Reserve
Yesterday, Statistics South Africa (StatsSA) noted that consumer inflation had slowed for a third consecutive month and moved down to 4.4% in August from 4.6% in July.
The US Federal Reserve slashed interest rates by 50bps on Wednesday. This is the first cut in four years and will play a role in the SARB’s decision to cut our interest rate.
Nedbank said on Wednesday that they expect headline inflation to remain below the mid-point of the Reserve Bank’s target range throughout the remainder of the year, ending 2024 at around 4%.
“We believe that the lower inflation trajectory and the start of the cutting cycle in major economies (particularly the US) will also prompt the SARB to begin cutting interest rates,” the bank added.
“We expect the SARB to cut by 25bps, taking the repo rate to 8%, followed by another cut of the same margin in November.
“These policy decisions will see the repo rate at 7.75% and the prime rate at 11.25% by the end of 2024. More cuts totalling 75 bps will follow in 2025, taking the prime rate to 10.50% at the end of the year,” Nedbank noted.
IOL BUSINESS