Economists believe SARB MPC’s next policy rate decision won’t be cut and dry

Some economists believe the next policy rate decision by the South African Reserve Bank (SARB)’s Monetary Policy Committee (MPC) will not be cut and dry, despite a marginal drop in the January inflation print.

Statistics South Africa (Stats SA) said the year got off to a slightly better start with prices after annual headline inflation dropped to 3.5%.

The reading was 3.6% in December.

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Economists at FNB believe headline inflation will ease further in February, to around 3.2%, supported by fuel price cuts.

But even if headline inflation remains contained and close to the central bank’s 3% target, FNB senior economist Koketso Mano said there’s more at play, especially after the SARB’s caution in the January MPC meeting.

“So, we think that when you look at inflation and the projections around inflation, especially by analysts and, you know, market participants, you will generally get the sense that there is still space to cut interest rates.

“I think where the Reserve Bank may be a little bit more cautious is around overall economy-wide expectations around inflation, and then still trying to entrench that in the system is something that might keep monetary policy conservative.”

Portfolio manager at Ninety-One Chris Steward said a 25-basis point cut could be on the cards as early as the March meeting, despite signals that rates would only be lowered later in 2026.