South Africans could yet have some relief as interest rates could come down around July.
This is according to Mpho Molopyane, the chief economist at Alexforbes. In the 2023 Alexforbes Manager Watch Annual Survey, Molopyane said that South Africa inflation figures are slowly coming to the midpoint of the Reserve Bank’s 3% to 6% target range.
This means that the country has faired well in its economic recovery after the Covid-19 pandemic. Moreover, Molopyane said the 2024 economic outlook for SA has improved due to reduced load shedding and increased self-generation capacity.
The South African Reserve Bank (SARB) would possibly cut interest rates by the second half of the year, beginning in July. Alexforbes argued that the decline in inflation would allow the bank to cut the repo rate by 75 basis points (bps) by July 2024.
The SARB could also cut the interest rate by a further 50bps next year.
In March, the Sarb’s Monetary Policy Committee (MPC) announced that the repo rate would remain unchanged.
Governor Lesetja Kganyago said the repo rate will remain at 8.25%, while the prime lending rate also stays at 11.75%.
According to the governor, this was an unanimous decision among the members of the MPC.
He said that unfortunately, SA’s economy performed worse than expected in the fourth quarter of last year, expanding just 0.1%.
Growth for 2023 as a whole was only 0.6%, Kganyago explained.
Standard Bank’s outlook
In February, Goolam Ballim, Standard Bank’s chief economist said in his yearly economic outlook that SA could expect four interest rates cuts of 25bps each by the end of 2024.
Standard Bank forecast an inflation rate of around 5% for 2024 and believes the reserve bank will begin interest rate cuts by the second quarter. This would mean that the repo rate would be down from 8.25% to 7.25% by the end of the year.
"We anticipate that it will mostly be quarter point cuts," Ballim said.
Nedbank is more conservative
Nedbank, like Kganyago, is more conservative and said in early April that relief from high interest rates will not be as expedient as previously thought.
Nedbank said that for the beginning of 2024, interest rates will be kept at the current restrictive level for longer, a sentiment shared with the Sarb.
The bank said in its economic monitor that it now only recommends cumulative cuts of around 50bps in 2024.
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