Hold or Cut? All Eyes on SARB as Rate Decision Looms

With inflation steady and US tariffs on the horizon, the Reserve Bank faces its trickiest call yet

South Africans are once again holding their breath as the South African Reserve Bank’s Monetary Policy Committee (MPC) prepares to announce its latest interest rate decision this Thursday, 31 July. Will we see another cut or a pause in the rate cycle?

The answer depends not just on local inflation data, but on what’s happening half a world away in Washington.

Local calm, global storm

Despite the chaos abroad, inflation at home is quietly behaving itself. Consumer prices are sitting comfortably near the bottom of the SARB’s 3% to 6% target range. In fact, they’ve spent most of the year well below the Bank’s preferred midpoint of 4.5%.

Ordinarily, this would make a strong case for easing interest rates. After all, the MPC has already cut rates twice this year, and four times since late 2024.

But there’s a storm brewing: new US tariffs on South African exports are set to take effect from 1 August. It’s a curveball no one needed and it’s making the MPC’s decision far more complicated than usual.

Mixed predictions from SA’s top banks

South Africa’s big financial institutions are split on what will happen this week.

FNB and Investec expect the Reserve Bank to keep rates on hold, citing the uncertainty created by the global trade environment, especially the looming 30% tariffs announced by the Trump administration as part of its so-called “Liberation Day” policy.

FNB analysts argue that while local conditions justify a cut, the risk of a weaker rand and potential inflation from global shocks may push the MPC to delay the move until September. “We don’t expect a full pivot in monetary policy,” FNB noted, “but caution is warranted.”

Investec, meanwhile, added that the SARB often follows the cautious example of the US Federal Reserve, which hasn’t changed its stance this year. With no clear inflationary threat and subdued domestic demand, Investec believes one more cut will come, but not just yet.

Nedbank and Bank of America (BofA) are singing a different tune. Both expect a 25-basis-point cut this week. Their reasoning? Inflation is soft, economic demand is weak, and the rand has held steady, despite the global drama.

Nedbank even downplayed the impact of the upcoming tariffs, noting that South Africa isn’t a major US trade partner and that much of the country’s inflation drivers like oil and imports remain muted.

BofA agrees, but with a warning: rate cuts beyond July are unlikely. As inflation begins to climb toward 4.4% by the year’s end, largely due to fuel base effects, the Bank believes SARB will opt to pause after this potential cut.

Tariffs and trade: the bigger picture

A huge shadow hanging over this week’s decision is the impending US tariff regime. Though South Africa isn’t a major trade partner for the US, these 30% duties, due to begin 1 August, have sent jitters through global markets.

Trade Minister Parks Tau has hinted at a possible pre-deal with the US, but details remain vague. Until there’s certainty, the MPC is navigating in a fog of unknowns.

These trade tensions underscore the MPC’s challenge: should it act on the comfortable local inflation outlook, or play it safe in the face of global unpredictability?

South Africans are watching and feeling the pinch

While economists debate in boardrooms, ordinary South Africans are battling high food prices, job market stagnation, and sluggish economic growth. Any relief in borrowing costs, no matter how small, would be welcome for homeowners and small businesses alike.

On social media, citizens are asking if this week’s decision will be “another missed opportunity” or a necessary step toward stability. Many say rate cuts are too small to feel and too slow to matter.

Whether SARB cuts or holds this week, it’s clear that the path forward is lined with caution tape. With inflation behaving and growth faltering, the door remains open to more rate cuts, but they may come slower than many hoped.

As South Africa faces down the uncertainty of a jittery global economy and unpredictable trade shifts, the MPC’s next move could set the tone for the rest of the year.

Stay tuned this Thursday to see which way the scale tips.

{Source: BusinessTech}

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