South Africa may be days away from its first interest rate cut since September, with financial markets signalling that the Reserve Bank could ease the repo rate when the Monetary Policy Committee (MPC) meets next week.
According to BusinessTech, market pricing shows an 80 percent probability of a 25-basis-point cut at the MPC meeting scheduled for 20 November 2025.
The repo rate currently sits at 7.00 percent after several reductions earlier this year.
Economists say expectations for a cut have risen following South Africa’s newly announced inflation target of 3 percent, with a flexibility band of 2 to 4 percent. Finance Minister Enoch Godongwana confirmed the lower target during Wednesday’s Medium Term Budget Policy Statement.
The Reserve Bank has been advocating for a narrower inflation range, arguing that the previous 3 to 6 percent band made the country less competitive globally.
Chief economist at Investec, Annabel Bishop, cautioned that the central bank may still choose to keep rates on hold, noting that the US Federal Reserve has signalled it is unlikely to cut again this year due to delays in US economic data releases.
She added that the MPC has adopted a more cautious tone in recent months, particularly after inflation edged up to 3.4 percent in September.
Despite this, some analysts see room for a cut. Bank of America’s Sub-Saharan Africa economist Tatonga Rusike said recent inflation readings came in below expectations, and noted that two MPC members already voted for a 25-basis-point reduction at the September meeting.
Rusike argued that the latest data “opened the door” for a November cut, although he expects the bank to pause further reductions until late 2026.
The Reserve Bank has trimmed rates gradually over the past 14 months, lowering the repo from 8.25 to 7.00 percent as inflation steadily declined. A cut next week would bring the rate to 6.75 percent.
A lower repo rate would reduce the cost of borrowing for households and businesses. This affects home loans, vehicle finance, personal loans and credit facilities such as overdrafts and store accounts.
However, rate cuts also reduce returns on savings products linked to the repo rate.
The Reserve Bank has indicated that the new inflation target should support lower interest rates over the medium term, helping economic growth while keeping price rises aligned with major trading partners.
The MPC decision will be announced next Wednesday afternoon.
