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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

The Core Dilemma: Demand vs. Supply and Interest Rates

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A view on Demand in the Economy: Retail Sales performance – March 2026 Data

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Consumer Inflation Rate – 2026

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The SARB’s High-Stakes Tightrope: Balancing an Inflation Breach Against a Jobless Crisis

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Mining Production and Sales for March 2026

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