Maarten Ackerman, Chief Economist at Citadel

The South African Reserve Bank’s (SARB’s) decision to cut the repo rate by 25 basis points (bps) in today’s Monetary Policy Committee (MPC) meeting comes as little surprise and was widely anticipated by both Citadel and broader market participants.

Commenting on the announcement, Maarten Ackerman, Chief Economist at Citadel, says, “The 25bps rate cut is fully in line with our expectations. It reflects the SARB’s growing confidence in South Africa’s (SA’s) inflation outlook and creates room for more accommodative monetary policy in a very weak growth environment.”

WEAK GROWTH, LOW INFLATION AND GLOBAL TRENDS CREATE ROOM TO CUT

Ackerman highlights that a combination of factors supported today’s decision, including weak domestic economic conditions, persistently low inflation and a global monetary shift towards easing. “The South African Reserve Bank (SARB) has been more cautious than some of its global peers, but this cut suggests that inflation is now firmly anchored and opens the door for a more flexible approach going forward,” he adds.

A SIGNAL TO MARKETS: INFLATION IS UNDER CONTROL

“This move signals that the SARB is comfortable with the inflation trajectory and is willing to provide support to the economy, as long as price stability remains intact,” explains Ackerman.

IMPLICATIONS FOR INVESTORS AND MARKETS

While the rate cut offers welcome relief for consumers, Ackerman says South Africa (SA) still boasts one of the highest real interest rates globally, making local fixed income investments relatively attractive. “This is good news for income-seeking investors, particularly in a volatile global environment,” he says.

However, Ackerman cautions investors against reacting too quickly: “A single rate cut doesn’t justify wholesale portfolio changes. Investors should remain focused on long-term objectives and consider the full interest rate cycle.”

Lower interest rates typically support growth in equities and property by reducing the cost of capital. “This cut could provide some tailwind to those sectors, especially in a low-growth environment,” he notes.

OUTLOOK: ONE MORE CUT LIKELY IN 2025

Looking ahead, Ackerman believes there’s room for at least one more cut before the end of the year. “Beyond that, we expect the SARB to pause and reassess the data, particularly inflation trends and global developments.”

While the SARB’s focus remains on local inflation, global forces such as disinflation, geopolitical risks and shifting international rate cycles indirectly shape SA’s policy room. “The relatively stable rand has also helped the SARB feel more confident in easing. A stronger rand helps limit imported inflation, one of the key risks the SARB typically monitors.” he explains.

CONCLUSION

Ackerman concludes, “The SARB’s decision reflects a careful balance between supporting the economy and maintaining inflation stability. It provides some relief in a tough environment, while keeping the longer-term inflation outlook firmly in sight.”