The Monetary Policy Committee (MPC) is set to announce on January 30, 2025, whether interest rates will change, and while many are hopeful for a cut, the outcome remains uncertain.
This is according to Adrian Goslett, Regional Director and CEO of Re/Max of Southern Africa.
"The MPC has consistently taken a cautious approach in each of these meetings. While many had hoped for larger and more timely rate cuts, the outcomes have repeatedly fallen short of expectations," Goslett said.
In their previous statement released in November, Lesetja Kganyago, Governor of the South African Reserve Bank (Sarb) said that the forecast sees interest rates easing further in future, steadying just above 7%. However, this rate path from the Quarterly Projection Model is a broad policy guide.
Due to the Sarb seeing interest rates decline to around 7% within the near future, there is reason to be cautiously optimistic about a possible rate cut this month, according to Goslett.
With inflation sitting at 2.9% in November 2024, it is still well within the target rage of the Sarb, however, the rand has also weakened against the dollar, plus oil prices remain volatile.
While further interest rate cuts cannot be guaranteed, Goslett said: "Unless circumstances take a dramatic change for the worse, it is not expected that interest rates will increase any further this year. At best, we should see interest rates drop to around 7% over the course of the year, and at worst, interest rates should hopefully just remain unchanged at the current rate of 7.75%."
"Ultimately, my hope is that we will start to steer away from an overly cautious approach and give the economy a much-needed boost by cutting rates more aggressively over the course of this year."
Interest rate cut
While Goslett said that the outcome of the interest rate is uncertain, according to Riaan Grobler, head of advisory services, Everest Wealth, the interest rate-cutting cycle will continue in January 2025.
Grobler said that the interest rate-cutting cycle will continue in January due to inflation being below the target band for the Sarb for the second month in a row.
In October and November, inflation was 2.8% and 2.9%, respectively, which is lower than the Sarb target band of 3% to 6% and there is room to lower the interest rate further.
Relief for consumers
Grobler said: "Consumers have suffered from large price increases in the past few years while the interest rate has risen by 475 basis points since November 2021 and has only dropped by 50 basis points."
Another rate cut this month will give consumers a boost after the festive season while another cut in March can help supplement the disposable income of consumers, according to Grobler.
"The interest rate is expected to be reduced two or three more times in 2025, potentially leading to a total decrease of at least 100 basis points or possibly 125 basis points."
IOL Business