Good News Expected For Interest Rates This Week

The Common Sense expects the South African Reserve Bank (SARB) to cut the repo rate by 25 basis points when the Monetary Policy Committee (MPC) meets later this week. Commercial banks use the repo rate as the base for their prime lending rate, adding a margin for their own costs and profit. When the repo rate moves, the prime lending rate shifts with it, tightening or easing the cost of credit for households and firms.

Factors in favour of a rate cut this week include:

• A markedly stronger rand that has reduced the risk of imported inflation (if the rand weakens, the cost of imported goods rises)
• Inflation itself drifting towards the new 3% target recently announced by the Minister of Finance
• Global rates have been edging lower, allowing the MPC to cut whilst maintaining a still competitive rate differential for the rest of the world(South Africa tries tomaintain higher rates than the global average to draw portfolio investment into the country, which helps to hold up the value of the currency)
• Domestic bond yields have fallen even as the currency has firmed, signalling renewed confidence in South Africa’s trajectory

Last week’s medium term budget strengthened that momentum, with its firmer fiscal stance helping to steady markets and support the rand. Analysts say this alignment of fiscal and monetary conditions has opened a narrow but important window for the SARB to provide long-awaited relief to consumers and businesses after a long period of elevated borrowing costs.

The prime interest rate has fallen by 1.25 percentage points since its 2024 peak of 11.75%. This reduction is the result of five consecutive cuts to the repo rate by the SARB, with the most recent cut on July 31, 2025, lowering the rate to 10.50%.

A cut would also bolster the Government of National Unity’s reform narrative, offering households immediate financial relief and supporting confidence in the wider economy.