South African Reserve Bank (SARB) is anticipated to initiate a rate-cutting cycle on September 19, lowering its benchmark interest rate by 25 basis points to eight per cent, according to a Reuters poll. This may mark the first reduction in over two years. The move comes after a prolonged period of tight monetary policy aimed at taming inflation, which has gradually eased to 5.1 per cent in June. The potential rate cut aligns with the Fed's expected easing cycle, set to commence a day earlier. The SARB's Monetary Policy Committee displayed a divided stance at its July meeting, with four members advocating for rate retention and two favoring a 25-basis-point cut. A recent Reuters poll, conducted between August 6 and 14, revealed that 19 out of 26 economists predict a 25-basis-point reduction in September. Market expectations suggest further rate cuts of 25 basis points in November, followed by two more reductions in the first quarter of 2025. The central bank is then projected to pause at 7.25 per cent before potentially delivering one more cut in 2026, bringing the rate to seven per cent. While South Africa's economy is showing signs of recovery in sectors like retail and manufacturing, the crucial mining industry remains subdued. However, easing power shortages and impending rate cuts are expected to bolster economic growth to 0.9 per cent this year and 1.6 per cent in 2025. Despite these positive indicators, South Africa grapples with a persistent unemployment rate, which climbed to 33.5 per cent in the second quarter of 2024. Inflation is projected to decelerate to an average of 4.9 per cent this year and 4.5 per cent in 2025. Attribution: Reuters
