South Africa's Central Bank to cut rates sparingly in 2025

South African Reserve Bank, or SARB, Governor Lesetja Kganyago expects only a few additional interest-rate cuts next year. The Governor repeated his emphasis on the uncertainty of the rate path.

Following a 25 basis point cut to 7.75 per cent on Thursday, the central bank said that its model indicated additional easing.

The SARB expects rates to stabilise a little above 7 per cent. However, the bank stressed that the estimate was only a broad policy guidance. Between one and three more 25 basis point cuts are seen next year.

Governor Kganyago said, "Decisions will be made on a meeting-by-meeting basis, with no forward guidance and no pre-commitment to any specific rate path.” Although inflation has slowed, he did note that Trump's policies might add to price pressures next year.

Andrew Matheny, an economist at the Goldman Sachs Group, noted, "Along with its characterisation of a ‘more challenging’ external environment, the SARB’s communication was therefore incrementally hawkish.”

With an annual rate of 2.8 per cent in October, South Africa's inflation fell short of the central bank's goal range of 3 per cent to 6 per cent. Still, the SARB increased its inflation prediction for late 2025 and 2026 by a small amount and warned that risks to the outlook "require a cautious approach."

Kganyago said that more trade protectionism may affect interest rates, even though he avoided addressing the US. Election explicitly in his last monetary policy news conference of the year.

The Governor said, "There is a concern that the protectionism we are seeing could impact global trade.” He added, “If it does become inflationary, you would expect that globally, central banks will react, and that changes the dynamic, and that is the uncertain environment within which we operate."