Sarb expected to hold rates next week

South Africa’s Reserve Bank will keep interest rates steady at 8.25% at its September 21 meeting to curb the impact of fuel price inflation, according to nearly all economists polled by Reuters, but will start cutting borrowing costs early next year.

In an almost unanimous poll taken September 7-13, 29 of 30 economists said the South African Reserve Bank will keep rates steady. One opted for a 50 basis point hike to 8.75%.


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“I expect no further rate hikes in South Africa – and the first cut in rates might come in the first quarter of 2024, rates could be lower by 100 to 125 bps by the end of 2024,” said Johann Els, chief economist of Old Mutual Investment Group.

The poll’s medians suggested the bank will cut in the first quarter of next year by 25 basis points, chop another 25 basis points in May – the only meeting in that quarter – and a final cut for the horizon is expected in the third quarter, to 7.75%.

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In the US, where policy tends to affect the rest of the world, the Federal Reserve will leave its benchmark overnight interest rate unchanged at the end of its September 19-20 policy meeting and probably until the April-June period of 2024, according to economists in a Reuters poll.

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The latest survey suggests inflation will quicken to 5.2% in the next two quarters, then moderate closer to the mid-point of the Reserve Bank’s 3%-6% comfort zone. This year it is expected to average 5.8% and 4.9% next year.

“While the September and October CPI data will be under upward pressure due to petrol price increases, I expect that uplift to be temporary,” added Els.

“Food inflation is still on a declining trend plus the sharp rise in petrol prices might turn out to be deflationary in that it crowds out other consumer spending and thus keeps a lid on price increases elsewhere.”


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Economists upped their outlook for this year and the median for annual 2023 GDP growth is now 0.7%, 0.4 percentage points higher than in an August survey, after the economy recorded a greater-than-expected expansion last quarter.

JPMorgan wrote in a note that the solid second-quarter gain reflected continued catch-up from the 4Q22 hole, increased investment in renewable energy and a reduced intensity of power cuts.

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However, South Africa’s power utility Eskom recently said power cuts would be more intense until further notice.