Rate Decision Looms as Economists Split on SARB Outlook

RATE DECISION – The South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) is set to conclude its latest interest rate decision on Thursday, with economists divided on whether the outcome will bring any change to the repo rate. While some analysts forecast a continued hold amid easing inflation pressures, others suggest a possible hike due to persistent currency volatility and global economic uncertainty.

With a complex mix of economic indicators at play, many analysts argue that Thursday’s decision is anything but straightforward. While consumers across the country are hoping for relief from persistently high borrowing costs, economists caution that interest rates may remain elevated for longer than expected.

Currently, the repo rate stands at 7.5%, with the prime lending rate at 11%. In March, the SARB halted its cutting cycle after three consecutive rate reductions, opting instead for a cautious pause amid mixed economic signals.

Some economists believe the MPC now faces a similarly delicate balancing act. On one hand, inflation remains below the midpoint of the Reserve Bank’s 3–6% target range, suggesting that there may be room for a cut. The rand has also shown surprising resilience in recent months, trading stronger than it has in some time, which could further support a more accommodative policy stance.

However, other economic headwinds complicate the picture. Although global inflationary pressures have somewhat eased, geopolitical uncertainty, ongoing fiscal challenges at home, and concerns over structural economic weaknesses may weigh on the Reserve Bank’s thinking.

Rate Decision Looms as Economists Divided on SARB’s Next Move

Adding to the complexity, global financial markets remain jittery. Previous rate decision by the SARB have been influenced by international factors, including former U.S. President Donald Trump’s trade policies and global fiscal instability. Today, those concerns have shifted to lingering global growth fears, tighter global financial conditions, and the evolving impact of interest rate decision by major central banks like the U.S. Federal Reserve.

A recent Reuters poll of 25 economists revealed a near-even split in expectations. While the majority of those surveyed anticipate a 25-basis-point rate cut during the May meeting, nine economists predict the MPC will opt to hold the rate steady once again.

“The data presents a compelling argument on both sides,” said one economist. “Yes, inflation is contained and the currency is stable, but the SARB may remain cautious in the face of long-term uncertainty.”

For South African consumers, the MPC’s decision could have significant consequences. Household debt levels remain high, and elevated interest rate decision continue to weigh heavily on borrowers. A cut in the repo rate would offer some relief by lowering monthly loan repayments and easing pressure on disposable income.

But economists warn that the Reserve Bank is likely to stick to its mandate of price stability over short-term relief, especially if it sees potential risks that could stoke inflation down the line.

If the SARB holds the rate, it will likely signal continued vigilance in guarding against inflationary pressures and defending the credibility of South Africa’s monetary policy framework.

The central bank is expected to release its rate decision and updated economic forecasts on Thursday afternoon, with Reserve Bank Governor Lesetja Kganyago addressing the media shortly thereafter.

As anticipation builds, all eyes will be on the SARB to see whether the data and broader economic climate sway the MPC toward a rate cut—or whether caution wins the day once again.