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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
January 30, 2025

Interest Rate

25 Basis Point Cut Interest Rate Cut

The interest rate has been cut by 25 basis points, aligning with market expectations. The Reserve Bank remains cautiously optimistic, forecasting contained inflation and an economic growth projection of 2.0% in the medium term. Increased disposable income and stable electricity supply are positive signs, despite some supply challenges in mining and manufacturing.

The interest rate has been reduced by another 25 basis points, a move that some market analysts anticipated. The Reserve Bank remains cautious, highlighting its commitment to closely monitoring local and international developments, especially the potential trade war among major economies. Importantly, inflation is expected to remain contained for at least the first half of 2025, with core inflation projected to stay within the target range of 3% to 6%.

Rising confidence levels and a stable electricity supply offer promising signs for economic growth in late 2024 and into 2025, with a growth projection of 2.0% for 2027. Commissioner Lesetja Kganyago emphasised that there are still upside risks, particularly regarding currency depreciation due to increased international tariffs linked to possible trade wars. Additionally, administered prices are expected to rise significantly, well above current inflation levels, which could further influence inflation in the economy.

On the demand side, the economy is rebounding from a low base, supported by increased disposable income resulting from withdrawals from the two-pot pension system and recent interest rate reductions since September 2024. However, the supply side remains subdued, with mining and manufacturing production figures still falling short of expectations.

The Governor also stated that the Bank’s inflation forecast for 2025 is around 4.5%. Future interest rate decisions will be data-driven, taking into account current economic conditions and international developments that may impact the domestic economy later in 2025.

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More Coverage

Why Hiking Interest Rates on Imported Inflation Will Stifle South Africa’s Fragile Economy

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Producer Price Inflation – July 2026

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Inflation Relief, Real-Economy Headwinds, and the Geopolitical Imperative for South Africa

South Africa has received a much-needed inflation reprieve, with July headline inflation easing to 4.3% and giving the South African Reserve Bank room to hold interest rates steady, but monetary relief alone cannot rescue an economy facing contracting mining and manufacturing sectors, depressed investment, mass unemployment, and mounting pressure on export earnings. This report examines how a 12.5% US tariff and a 56% annualised plunge in exports are intensifying the country’s economic vulnerability, while diplomatic disputes over property rights, empowerment policy, rural safety, political rhetoric, and South Africa’s geopolitical alliances threaten access to the strategically vital US market. It also sets out the practical policy choices, from structural reform and infrastructure investment to pragmatic trade diplomacy, that could determine whether South Africa converts this brief moment of inflation stability into sustainable growth or slips deeper into stagnation

Consumer Inflation – July 2026

South Africa’s July 2026 inflation reading delivered a genuine surprise: consumer prices rose just 4.3% year-on-year, well below June’s 5.0% and under the 4.5% the market had pencilled in, yet the story beneath that headline is far more complicated than a simple cooling trend. Goods inflation has slipped into the SARB’s new 2–4% target band, but services inflation stubbornly holds at 5.0%, revealing that price pressure is now entering the economy through a channel monetary policy struggles to reach. Meanwhile, housing, transport, and financial services drove the bulk of the increase; fuel costs remain elevated amid the renewed Middle East conflict and rising oil prices; and households and businesses relying on short-term credit are dangerously exposed to any shift in rates, the rand, or import costs. Add US tariffs weighing on manufacturing, fragile 0.5% first-quarter growth, and a Reserve Bank that has already wrong-footed markets twice this year, and the run-up to the 23 September MPC meeting becomes anything but predictable. This report unpacks what the numbers actually signal, why the SARB is holding its nerve, and what it will take to tip the next rate decision either way.