SA’s lower inflation rate surprises and SARB cuts interest rates by 25 bps

SA’s headline inflation rate for October fell to 2.8% y/y, which was lower than expected, showing a pleasing reduction from above 5% in June. A key reason was a drop in fuel inflation, which is currently -19%. Food inflation has also dropped below 3% from over 14% in 2023. However, there is upward pressure on fuel, food and electricity prices and inflation is likely to revert to about 4.5% in the second half of 2025.
The South African Reserve Bank’s (SARB) decision to cut interest rates by 25 bps at its latest meeting was unanimous and expected by the market. Rather surprisingly, the bank said it had not considered cutting rates by 50 bps. It said international central banks have become more cautious and the South African economy was gaining momentum. STANLIB sees only 50-75 bps of additional interest rate cuts in the current cycle, taking the repo rate to about 7%. Click here to listen to the podcast.