Homeowners in South Africa to Enjoy Another Interest Rate Cut Next Week

South African homeowners can expect some good news next week, with a likely interest rate cut of 25 basis points, set to be announced on Thursday, 30 January 2025. Economists believe that the South African Reserve Bank (SARB) will make the move due to stable inflation levels and an overall positive economic outlook.

Why the Interest Rate Cut is Happening

The latest inflation figures, released on Wednesday, 22 January 2025, showed that inflation is at a flat 3.0%, well below the SARB’s target of 4.5%. This has given economists more confidence that the Reserve Bank can ease its monetary policy without sparking inflationary pressures.

Nedbank’s economists note that inflation remains benign and is expected to stay subdued. They believe that there is ample room for further easing of the interest rate. The expected 25 basis point cut would bring the repo rate to 7.25%, and the prime lending rate to 10.75%.

Risks and Challenges for South Africa

While the rate cut is likely, there are some risks that could limit the SARB’s ability to act more aggressively. These risks include potential global uncertainties and local inflationary pressures.

Economists are slightly cautious, as global uncertainties like the potential impacts of a Donald Trump presidency in the United States and the Federal Reserve’s monetary policy could influence the rand. Despite this, local rate cuts are still behind those seen in the US, providing some space for further reductions in South Africa.

The SARB’s cautious approach to monetary policy is also influenced by persistent upside risks in inflation. The Bureau for Economic Research (BER) warns that while another 25 basis point cut next week seems certain, further cuts might not be as forthcoming in the near future.

What Homeowners Can Expect in 2025

South African homeowners should prepare for the potential of two 25 basis point rate cuts in 2025. The first is expected next week, and a second cut may happen later in the year, possibly in March.

However, experts suggest that homeowners should temper their expectations for further cuts beyond that. With inflation risks still present and a relatively cautious SARB, rate cuts may slow down or even stall after March.

Key Takeaways

• South African homeowners can look forward to a 25 basis point interest rate cut next week.
• Inflation has remained subdued at 3.0%, allowing for further monetary easing.
• Global risks and local inflation concerns could limit the SARB’s actions in the future.
• A second rate cut is expected later in 2025, but homeowners should remain cautious about future reductions.

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