Expected Interest rate decision by the SARB
The inflation rate has decreased significantly in the first half of 2024, dropping from 7.3% in July 2022 to 4.7% in July 2024. This decline is due to higher interest rates, rising consumer debt, and reduced overall demand, which have put downward pressure on prices throughout the economy.
Globally, inflationary pressures grew as excess COVID-relief funds led to widespread price increases, including in South Africa, where import prices escalated in dollar terms. Both consumers and businesses struggled with rising prices and diminishing purchasing power, slowing down demand and price increases.
With inflation easing both domestically and internationally, some EU countries have already reduced interest rates, and recession fears in the U.S. could prompt the Fed to do the same in mid-September. Considering the low demand, subdued economic activity, slowing inflation in South Africa, and a potential rate cut in the U.S., a 25-basis point reduction in South Africa’s interest rate is anticipated. However, the South African Reserve Bank has warned that any increase in inflation or inflation expectations in the coming months could result in smaller-than-expected rate cuts in the short to medium term and much can still happen from now until the 19th of September when the rate announcement is made.