The South African Reserve Bank will leave its repo rate on hold this week but cut rates by 25 basis points to 8% in September as inflation cools, a Reuters poll found on Monday, earlier than a November move that was expected in a June survey.

Eighteen of 20 economists surveyed in the past week said the Reserve Bank would hold interest rates at 8.25% on 18 July and the median forecast showed a trim in September.

Two expected a cut on Thursday. Another 25 basis point cut was expected in November, with the rate ending the year at 7.75%, the poll showed.

“Although we think monetary authorities will be cautious and only start lowering the repo rate from Q4 2024, the odds of a 25bps rate cut in September have risen post-elections,” said Jee-A van der Linde, senior economist for Africa at Oxford Economists.

“Even if the Sarb cuts interest rates a couple of times this year, it wouldn’t be inflationary as monetary policy would remain restrictive.”

The Reserve Bank tries to keep inflation within a targeted 3-6% range. Inflation was expected to slow to an average of 4.9% this year and 4.5% in 2025, from 5.2% on the year in May.

Managing expectations

Gina Schoeman, head of South Africa research at Citi, said the door was opening quickly for potential rate cuts in September and November. “The Sarb just needs to manage expectations around normalising rates and a potential lowering of the inflation target.”