The South African Reserve Bank (SARB) announced its decision Thursday, 30 January 2025, to lower its repo rate by 0.25. Consequently, FNB confirms that it will reduce the rate on its prime-linked accounts with effect from Friday 31 January 2025.
This latest interest rate decision aligns to the bank’s outlook and anticipation for a 25bps cut at each of the next three Monetary Policy Committee (MPC) meetings, which could bring the repo rate to 7% by mid-2025.
FNB CEO Harry Kellan says, “Today’s rate cut is certain to further lift business prospects in the upcoming months as consumer and business confidence rise. While we noted a modest inflation uptick at the end of 2024, projections for the year ahead indicate declining inflation expectations. According to our FNB Economics insights, the inflation forecast is set to remain below 4.0% through the first half of 2025. This creates further opportunities for rate cuts at future MPC meetings.
“The Reserve Bank took a courageous step to lower interest rates at a time when the world is closely watching for policy shifts by the new government in the United States (US). Projections for South Africa’s GDP growth in 2025 remain just below 2%, which is still not ideal for the South African economy with a relatively young and growing population seeking employment opportunities. With the prospect of lower interest rates in future, there is greater potential for growth to exceed current expectations. We remain optimistic that the economy will continue to gather momentum,” Kellan further highlights.
FNB Chief Economist Mamello Matikinca-Ngwenya says, “Today’s 25 basis point interest rate cut comes as expected. Inflation has continued to surprise analysts to the downside, remaining at the bottom of the inflation target band, and these levels are expected to be maintained until the second half of 2025 when positive base effects fade and domestic demand improves. We anticipate that a lift in inflation in the latter part of the year will dampen policy space and the scope for a more extensive interest rate cutting cycle.”
“Furthermore, the confluence of risks from higher local administered price inflation and global trade wars (which would bring higher inflation, a stronger dollar, and tighter Fed policy) versus de-escalated geopolitical tensions and lower oil prices should keep the MPC cautious. That said, current forecasts show inflation anchored around 4.5% over the forecast horizon which should give space for a couple more cuts this year. Furthermore, improved productivity in SA’s supply-side dynamics should support lower structural inflation and interest rates over the longer term,” concludes Matikinca-Ngwenya.
