South Africa’s interest rate outlook has changed once more, with investors growing cautious about when the next rate cut will happen. According to the Bank of America Fund Manager Survey (October 2025), most investors still believe the South African Reserve Bank (SARB) is on a cutting path, but they are less certain that it will cut again this year.
While inflation remains low and growth is slowly improving, the SARB’s focus on maintaining credibility and a stricter inflation target means interest rates are likely to stay high for longer.
ALSO READ: SA Interest Rates: What to Expect for the Remainder of the Year Prioritize
Investors Still Expect Cuts, But Not Yet
The latest Bank of America survey shows that 88% of fund managers expect the SARB’s next policy move to be a rate cut. However, only half of them believe it will happen at the final Monetary Policy Committee (MPC) meeting in November 2025, down from nearly two-thirds in September.
Fund managers now forecast two 25-basis-point cuts in the current cycle, which would lower the repo rate to about 6.50% within 12 months. The timing, however, has shifted from the end of 2025 to mid-2026.
This change follows a global pattern. Central banks, including the US Federal Reserve, are slowing their easing cycles as they watch inflation trends closely. In South Africa, weak household spending, power-supply issues, and limited economic growth have added to the SARB’s cautious tone.
Renewed Optimism in Local Markets
Even with delayed cuts, investor confidence in South Africa’s local economy is improving. The Bank of America survey found that 81% of fund managers are bullish on South African equities, marking a clear shift away from mining and resource stocks toward retailers, food producers, and banks.
This shift suggests growing optimism about local consumption and business activity. Inflation has also stayed low. Stats SA is expected to report September 2025 inflation at 3.5% year-on-year, keeping price growth close to the SARB’s target range.
The International Monetary Fund (IMF) recently lifted its 2025 growth forecast for South Africa to 1.1%, reflecting a slow but steady recovery. Still, both inflation and growth remain fragile, and the SARB prefers to see price expectations anchored near 3% before making another move.
SARB Holds Steady on Policy
The South African Reserve Bank has kept the repo rate at 7.00% since July, describing its policy stance as “modestly restrictive.”
In its July 2025 Monetary Policy Statement, the Bank noted that global risks, such as oil-price swings and geopolitical uncertainty, could still affect local inflation. It also confirmed that the SARB will now use a 3% inflation anchor in its forecasts instead of the old 4.5% midpoint.
Economists support the cautious approach but differ on timing.
- Yvonne Mhango of Bloomberg Economics expects the SARB to hold rates through 2025 to protect its new 3% goal.
- Sanisha Packirisamy of Momentum shares that view, expecting the first cut only in early 2026.
- Annabel Bishop of Investec believes there is still room for a small 25-basis-point cut before year-end, describing current rates as “highly restrictive” for households and businesses.
High Rates Help the Rand but Limit Growth
Since 2024, the SARB has cut rates by roughly 125 basis points, but its latest meeting ended in a 4–2 vote to keep policy unchanged. The two opposing members reportedly supported a small hike as a reminder that some policymakers still see inflation risks.
Many economists say monetary policy remains tight, especially given slow domestic growth. The Bank of America survey found 69% of fund managers view current rates as too restrictive.
Holding rates high supports the rand, particularly as the US Federal Reserve starts a more aggressive cutting cycle. The rate differential attracts investors to South African bonds and helps stabilise the currency. However, the cost of this stability is slower consumer spending and weaker business expansion.
Gradual Easing Expected in 2026
Market consensus now points to a measured easing cycle rather than rapid cuts. Most forecasts suggest:
- A possible 25-basis-point cut late in 2025 if inflation remains below 4%.
- Further cuts of 25–50 basis points during 2026, bringing the repo rate to about 6.50%.
- Some analysts predict a total reduction of up to 75 basis points by late 2026 if global and local conditions allow.
The SARB’s long-term plan to anchor inflation at 3% could eventually make lower rates more sustainable. However, real progress will depend on economic reforms, fiscal discipline, and stronger investment growth.
The next MPC meeting on 20 November 2025 will be closely watched as a signal of whether the SARB is ready to shift its stance or will continue to wait for clearer inflation data.
Economic Indicators to Watch
| Indicator | Current / Forecast | Trend |
|---|---|---|
| Repo Rate | 7.00% | On hold since July 2025 |
| Inflation (CPI) | 3.5% y/y (Sep 2025) | Near lower target |
| GDP Growth (IMF 2025) | 1.1% | Slow improvement |
| Rand vs USD | Stable | Supported by rate differential |
| Market Outlook | Gradual easing | Cuts expected in 2026 |
South Africa’s Monetary Path Forward
South Africa’s interest rate outlook highlights a central bank prioritising discipline over speed. Inflation is low, investor confidence is rising, and the groundwork for eventual easing is in place.
However, most signs point to another year of high borrowing costs. The SARB’s approach is deliberate protect price stability first, then create space for growth.
If inflation stays close to 3% and reforms strengthen the economy, rate cuts will likely follow by mid-2026. Until then, South Africa’s monetary policy will remain steady, signalling that patience and credibility come before quick relief.
READ MORE: SARB Expected to Cut Interest Rates Again This Year, But Economists Disagree on Timing