Business
SARB Eyes Potential Interest Rate Cuts Amid Weak Rand and Rising Oil Prices

The South African Reserve Bank (SARB) is considering cutting interest rates this month and again in March, despite challenges posed by rising oil prices and a weakened rand.
Economic analysts from the Bureau for Economic Research (BER) say the first window of opportunity could arise during SARB’s 30 January 2024 meeting.
Global Dynamics Impacting South Africa
While geopolitical developments like the recent ceasefire between Israel and Hamas often help stabilize oil prices, other global factors have complicated the situation.
Aggressive sanctions imposed on Russia’s oil industry amid the Ukraine conflict have pushed Brent crude prices above $81 per barrel, intensifying pressure on global markets.
Despite marginal gains, the rand remains weak, with the January average exchange rate showing a 60-cent depreciation compared to December, sitting at R18.80 to the dollar.
Fuel Prices and Inflationary Concerns
South African consumers are bracing for a potential fourth consecutive fuel price hike in February, with projected increases ranging from 75 to 90 cents per litre.
The BER warns that this, combined with a weaker rand, poses risks to inflation control. However, they note that inflation expectations are moving in the right direction, aligning closer to the 4.5% target band.
Room for Rate Cuts
The BER believes SARB has the opportunity to bring its policy rate closer to neutral in January, potentially followed by another cut in March.
“Inflation expectations have improved, and even with pressures from the rand and oil prices, inflation is forecasted to remain manageable,” the BER stated.
Financial markets have adjusted their expectations from three interest rate cuts to one 25 basis-point cut in 2024. The BER notes that SARB may take a cautious approach by holding rates in January, opting instead to assess how global dynamics evolve before acting.
While uncertainties persist, the Reserve Bank’s decisions will likely be influenced by evolving global economic conditions, inflationary pressures, and the rand’s performance.
South Africans await SARB’s 30 January meeting for clarity on whether relief from interest rates will be on the horizon, even as external economic factors weigh heavily on local markets.