A firmer rand and declining borrowing costs are offering welcome relief to consumers and businesses, raising hopes that interest rate cuts may soon be on the horizon.
Economists believe the South African Reserve Bank (SARB) could lower rates twice this year as inflation continues to ease.
Investec chief economist Annabel Bishop says financial markets have fully priced in a 0.25 percentage point cut to the repo rate in March.
A second reduction of the same size, potentially in September, is only partly priced in, which she notes has boosted investor sentiment and supported the rand’s recent gains.
Since September 2024, South Africa has reduced interest rates by a cumulative 1.50 percentage points, with the prime lending rate currently at 10.5%. Bishop adds that markets do not yet expect further cuts next year.
PSG Financial Services chief economist Johann Els also believes the SARB is well positioned to continue easing monetary policy.
He anticipates two more rate reductions in the first half of 2026, supported by an improving inflation outlook. Els expects inflation to average around 3.2% in 2025, rising slightly to 3.6% this year.
He says stable food prices, boosted by favourable rainfall and strong maize production, are helping keep inflation in check.
The fading impact of foot and mouth disease on meat prices is also providing relief. Bishop echoes that a stronger rand is helping soften price pressure on fuel and food, further supporting the inflation outlook.
Els predicts modest economic growth this year and stronger gains in 2027. Growth for 2025, which has not yet been officially confirmed, looks likely to come in close to his 1.4% projection, a notable improvement from the sub-1% forecasts made at the start of the year.
For 2026, he expects growth of 1.7%, with the potential to surpass 2% the following year.
Despite the gradual pace, economists agree the country is moving in a positive direction after years of sluggish expansion.
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