South Africans who saw nothing to be happy about in last week’s mini-budget are pinning their hopes on the Reserve Bank to cut the repo rate on Thursday at the MPC’s last meeting of 2025. Some economists think it can happen, but not all do.
Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER), expects that the Monetary Policy Committee (MPC) of the South African Reserve Bank (Sarb) will keep the repo rate unchanged at 7%.
“Ahead of the mini-budget, we anticipated that while there would be a split vote among MPC members, the majority would tilt towards keeping rates on hold.
“Following the firm target announcement by the National Treasury and expected revisions to the Sarb’s near-term rand and oil price forecast, we think the majority will now vote in favour of a cut.
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The MPC will discuss cutting the repo rate, but will decide against it – BER
“If anything, the possibility of a 50 basis points cut will now be discussed, although that will not be implemented. Importantly, if the Sarb does cut, it will not mean we will see consecutive interest rate declines in the next couple of meetings.”
She said the Sarb is likely to keep a close eye on inflation expectations, its CPI forecast and will fine-tune policy as risks emerge and subside. De Schepper also pointed out that the MPC follows the day after the inflation rate for October is released, although that is unlikely to sway the MPC, regardless of the outcome.
“We expect inflation to tick up during the fourth quarter from 3.4% in September. While near-term data is perhaps more important than usual at a time when the Sarb is guiding us through a target preference shift, the Sarb tends to be more forward-looking.”
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A unanimous decision to cut the repo rate by 25 basis points – Investec
Tertia Jacobs, treasury economist and fixed income specialist at Investec, said Investec Corporate Institutional Banking expected a repo rate cut of 25 basis points in a unanimous decision of the MPC.
“The MPC meeting takes place in a shifting policy landscape, following last week’s mini-budget which included the minister of finance’s endorsement of a lower inflation target of 3%, with a tolerance band of ±1 ppt.
“This policy adjustment marks a significant step toward enhanced monetary-fiscal policy coordination. It reinforces the importance of a credible fiscal framework centred on fiscal consolidation and debt sustainability, while also integrating a lower inflation trajectory into baseline forecasts, resulting in a technical adjustment of index-linked spending such as social grants.”
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MPC will keep repo rate unchanged until the second half of 2026 – FNB economists
Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole, Koketso Mano and Ame Muller, economists at FNB, expected the next repo rate cut to only happen in the second half of 2026.
“The MPC will announce the last repo rate decision of the year concluding a period marked by elevated uncertainty and market volatility.
“While 2025 was expected to be turbulent, the path to a 7% repo rate was initially projected to be smooth, anchored by three consecutive 25 basis points cuts early in the year. However, external shocks from the new US administration’s tariff policies and South Africa’s fraught budgeting process disrupted this trajectory, prompting a pause in March.
“Despite these headwinds, inflation surprised to the downside and the rand held steady, allowing the MPC to resume rate cuts in May and July.
“A policy rate of 7% is consistent with a neutral real rate of 2.5% and longer-term inflation of 4.5%. Therefore, when the MPC moved to shift to a lower target of 3% in July, which was endorsed by the minister of finance, new space was created to ease policy further.
“Some market participants think the next cut could be as early as the upcoming meeting, while the majority think that the next cut will be in the first quarter of 2026 but we currently think it will be in the second half of 2026.”
They expected the MPC to hold rates steady in November, emphasising the importance of anchoring medium-term price-setter inflation expectations.
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MPC will cut repo rate by 25 basis points – Nedbank economists
Busisiwe Nkonki and Isaac Matshego, economists at the Nedbank Group Economic Unit, said it is a difficult meeting to call and market opinion is divided between a hold and a cut. However, they believed that the MPC will cut the repo rate by 25 basis points.
“Unlike July and September, this month’s meeting will not be clouded by any lingering doubts about the new inflation target. National Treasury put the issue to rest when it officially lowered the inflation target to 2-4% on Wednesday. The MPC will remain focused on anchoring inflation around the 3% midpoint.”
They said the latest inflation numbers due on Wednesday are unlikely to make the MPC’s job any easier. “We expect inflation to increase from 3.4% in September to 3.8% in October. Our forecast suggests inflation will rise further, peaking around 4% by the end of next year, before starting its descent and reaching the 3% target by the end of 2027.
“Given the generally benign environment, we believe the MPC will cut by 25 basis points, moving the real policy rate closer to neutral. It is worth noting that even if the MPC eases next week, the real policy rate will remain quite high, hovering just short of 3%.”
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