Cooling Inflation Reignites Rate-Cut Expectations Amid Growth Concerns 

Cooling Inflation Reignites Rate-Cut Expectations Amid Growth Concerns 

As inflationary pressures continue to ease, speculation surrounding an imminent interest rate cut by the South African Reserve Bank (SARB) has gathered fresh momentum. Economists are increasingly pointing to softening consumer price growth and subdued economic expansion as reasons for monetary policy recalibration. Yet, the timing and magnitude of such a move remain the subject of careful scrutiny and debate. 

Consumer inflation in South Africa recently fell within the Reserve Bank’s target range of 3–6% for the fourth consecutive month, buoyed by declining fuel prices, slower food inflation, and muted demand-side pressures. The headline inflation rate stood at 5.3% in April, down from 5.6% in March, reinforcing a downward trend that has given policymakers renewed room to manoeuvre. 

Two leading economists—Dr. Nthabiseng Moleko and Johan Els—shared diverging but complementary perspectives on the path ahead. Moleko, an advocate for more proactive developmental policy, argued that persistently high interest rates are constraining investment and consumption, further dampening an already sluggish economy. “With inflation losing steam, now is an opportune moment for SARB to consider loosening its grip. We need a pivot toward stimulating economic activity and job creation,” she noted. 

Els, chief economist at Old Mutual Investment Group, struck a more cautious tone. While acknowledging the improving inflation picture, he emphasized that the Reserve Bank will likely await clearer signals of sustainable disinflation before acting. “Global uncertainty, particularly around oil prices and geopolitical tensions, remains a risk. The SARB is understandably conservative and will want to see continued inflation moderation before committing to a cut,” he said. 

South Africa’s GDP growth remains anaemic, hovering below 1% annually—a level inadequate to address widespread unemployment and inequality. Load shedding, fragile investor confidence, and constrained fiscal space have limited the government’s ability to spur growth independently, intensifying reliance on monetary policy as a potential lever. 

The Monetary Policy Committee (MPC) has maintained the repurchase rate at 8.25% since May 2023, prioritizing price stability amidst volatile global conditions. However, recent forward guidance has grown increasingly nuanced, suggesting a shift in tone. SARB Governor Lesetja Kganyago recently hinted that if inflation remains anchored and expectations continue to decline, easing could be on the table later in 2025. 

Financial markets have already begun pricing in a possible rate cut, with the rand stabilizing and long-term bond yields easing modestly in anticipation. Yet, analysts warn against over-optimism, pointing to the SARB’s track record of prudence and its mandate to safeguard long-term financial stability. 

In the broader global context, central banks from the US Federal Reserve to the European Central Bank are also walking a tightrope between persistent inflationary risks and decelerating growth. South Africa’s policy stance remains influenced by these dynamics, particularly due to the impact on capital flows and currency volatility. 

Whether or not a rate cut materializes in the near term, one message is clear: the conversation has shifted. With inflation appearing more tame and economic activity under strain, the balance of risks is beginning to tilt toward supporting growth. How decisively SARB responds could shape the economic landscape for months to come. 

References 

• South African Reserve Bank. (2024). Monetary Policy Review – April 2024. Retrieved from https://www.resbank.co.za 
• Statistics South Africa. (2024). Consumer Price Index – April 2024. Retrieved from https://www.statssa.gov.za 
• Els, J. (2025). Personal commentary at the Old Mutual Economic Outlook Briefing. 
• Moleko, N. (2025). Commentary during panel discussion on SABC News, May 2025. 
• International Monetary Fund. (2024). World Economic Outlook: Balancing Inflation and Growth. Retrieved from https://www.imf.org