South Africa’s monetary policy outlook for 2025 is becoming clearer as inflation shows signs of stability and economic growth remains under pressure.
Top financial institutions, including Goldman Sachs and Investec, are now forecasting a more accommodative stance from the South African Reserve Bank (SARB).
Both firms anticipate that SARB could cut interest rates up to three times in 2025 as inflation slows and domestic demand weakens. This would mark a shift from the current tightening cycle and provide relief for consumers, businesses, and investors.
SARB Policy Position
The SARB has held the repo rate steady at 7.25% since late 2024. This cautious approach was meant to keep inflation within the 3%–6% target band, while supporting a fragile economic recovery.
According to Goldman Sachs, SARB now has the room to begin easing interest rates gradually. The firm expects up to three 25-basis-point cuts in 2025, depending on how inflation and external conditions evolve.
Investec shares a similar view. Its economic outlook suggests that a slower growth environment, combined with declining inflation expectations, will allow SARB to begin loosening policy without risking price instability.
Inflation Trends: The Turning Point
The June 2025 consumer price index (CPI) rose to 3.0% year-on-year, up slightly from 2.8% in May. This increase was largely driven by seasonal food price changes, higher electricity costs, and moderate rent increases.
Despite this slight uptick, core inflation remains below the midpoint of SARB’s target range. Food and non-alcoholic beverage inflation reached 5.1% in June, while housing and utilities also recorded modest gains.
Crucially, recent inflation surveys show that expectations among businesses and consumers are now below 4%—a level that suggests SARB’s monetary stance has successfully anchored long-term price outlooks.
Why Rate Cuts Are Expected
Goldman Sachs and Investec base their forecasts on several key developments.
First, inflation expectations are falling. Analysts and market surveys show growing confidence that inflation will remain within SARB’s target range for the foreseeable future.
Second, South Africa’s economic growth remains weak. GDP projections for 2025 have been revised down to around 1.1%, reflecting continued challenges including high unemployment, constrained investment, and ongoing energy disruptions.
Third, the global monetary environment is shifting. Central banks in the US and Europe are starting to ease rates, reducing the pressure on emerging markets like South Africa to maintain high interest rates to protect their currencies.
Market Reaction and Outlook
Expectations of interest rate cuts have already started to influence investor sentiment. Bond yields have eased, and the South African rand has remained relatively stable, suggesting confidence in SARB’s ability to manage inflation without sacrificing currency strength.
If SARB does move to cut rates, it could lower borrowing costs for households and businesses, stimulate spending, and boost overall economic activity.
The next Monetary Policy Committee (MPC) meeting is scheduled for 31 July 2025. While no immediate rate cut is guaranteed, the tone of the announcement will be closely watched for signals of a policy shift in the second half of the year.
Interest Rate Forecast for 2025
The outlook for South Africa’s interest rates in 2025 is increasingly leaning toward a gradual easing cycle. With inflation under control and economic growth slowing, leading analysts from Goldman Sachs and Investec foresee up to three repo rate cuts in the coming year.
If these predictions materialize, South Africa could see a more supportive interest rate environment that encourages investment, boosts household spending, and revives business confidence.
Key Data at a Glance
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Current repo rate: 7.25%
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June 2025 inflation: 3.0% year-on-year
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Expected interest rate cuts in 2025: Up to 3
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Inflation expectations: Below 4%
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GDP growth forecast for 2025: Approximately 1.1%
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Next SARB meeting: 31 July 2025
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