Expert Says Reserve Bank Is Likely To Keep Interest Rates Unchanged

Independent economist Elize Kruger has forecasted that the Reserve Bank is likely to keep interest rates unchanged when it announces its rate decision this afternoon.

At its last meeting, the Reserve Bank’s Monetary Policy Committee maintained the repo rate at its 14-year high of 8.25%, while the prime lending rate also stayed on hold at 11.75%.

Since November 2021, the Reserve Bank has raised interest rates by 475 basis points in response to runaway inflation, which had heavily impacted the economy following the lifting of COVID-19 lockdowns.

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This series of rate increases was aimed at curbing inflation and stabilizing the economic outlook.

Kruger believes that the Reserve Bank is likely to start cutting interest rates in the third quarter of the year. “My view is that the committee will most likely decide to keep rates unchanged again at current levels.

“However, I do believe that the scenario is building for a cut in interest rates, especially now that we’ve had election results, the rand strengthened by about 3% post-election, and looking forward, inflation is expected to moderate further,” she said.

According to Kruger, the Reserve Bank’s own forecasts suggest an average headline CPI number of 4.7% in Q4 and an average of 4% in 2025. “A forward-looking view is that the Reserve Bank should now see an opportunity to cut rates.

However, the consensus is that it will not happen at this meeting, but probably at the September MPC meeting,” she added.