Will the Sarb Cut Rates? Experts Clash as Inflation Hits 2.7% Low

With South Africa’s consumer inflation falling to 2.7% in March 2025—the lowest since 2020—hopes are rising that the South African Reserve Bank (Sarb) could cut interest rates in the upcoming Monetary Policy Committee (MPC) meeting. But economists, debt experts, and analysts remain deeply divided on whether the Sarb will move from caution to action.

At the heart of the debate is the repo rate, which remains stubbornly high at 7.5%, despite easing inflation and mounting household distress.

Consumers Under Pressure

Neil Roets, CEO of Debt Rescue, says any relief—however small—would be welcome.

“Even a 25 or 50 basis point cut would barely make a dent,” Roets cautioned. “South Africans are already overwhelmed by rising food costs, electricity hikes, and spiraling debt repayments.”

He added that Debt Rescue’s April 2025 consumer survey showed a sharp rise in the use of short-term credit as families struggle to survive.

Roets also warned that monetary policy alone won’t resolve the crisis but said decisive action would help ease the debt load and restore some much-needed economic confidence.

Cautious Optimism Among Analysts

While some financial experts believe the Sarb will hold off on cuts, others are more hopeful.

Benay Sager, executive head of DebtBusters, said a rate cut would “give consumers breathing room,” but he suspects the Sarb will wait.

“If the rate stays unchanged, it will likely be due to global macroeconomic trends, not domestic issues,” he said.

Meanwhile, Anchor Capital economist Casey Sprake sees room for optimism. She believes the Sarb could cut the interest rate by 25 basis points in May, followed by another cut later in the year.

“Oil prices are falling thanks to higher OPEC output,” Sprake noted. “This supports low inflation and gives the Sarb space to adjust rates.”

Sprake also flagged that global easing by the Fed and ECB could pressure the Sarb to move earlier and deeper with rate cuts—especially if capital volatility and weak global growth take hold.

A Delicate Balancing Act

Despite the optimism, most experts agree that the Sarb will tread carefully. The Reserve Bank has long maintained a data-driven, conservative stance, particularly in uncertain global economic conditions.

But with inflation dropping and South African households under mounting pressure, many are hoping that the central bank begins to shift its tone.

“The cost of doing nothing may soon outweigh the risks of acting,” Roets concluded.

Key Takeaways:

• Inflation dropped to 2.7% in March 2025, its lowest since 2020.

• Sarb’s repo rate remains at 7.5%, despite falling inflation.

• Debt experts say even a small cut could help struggling consumers.

• Analysts are split, but some expect a 25bps rate cut in May.

• Global factors—including Fed and ECB decisions—may influence Sarb’s move.

{Source: IOL}

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