South Africa Could See Two Interest Rate Cuts in 2025, Says Bank of America

Economists from Bank of America (BofA) predict that South Africa may experience two consecutive interest rate cuts in 2025, with reductions expected in May and July. This forecast comes after the bank’s recent three-day visit to South Africa, where analysts assessed the economic landscape.

Diverging Views on Rate Cut Timing

BofA’s projection differs from most local economists who anticipate only one rate cut later in 2025, likely in September or December. The bank believes the South African Reserve Bank (SARB) will take advantage of stabilizing global markets to implement these cuts.

“The policy rate is likely to reach 7% by end-July,” BofA stated, citing several favorable factors:

• Benign inflation averaging 3.6%
• Low oil prices at $65 per barrel
• A weakening US dollar boosting the rand

Risk Factors Under Consideration

Despite their optimistic outlook, BofA noted that SARB remains cautious due to:

• Global economic uncertainties
• Domestic fiscal challenges
• Political risks surrounding the Government of National Unity (GNU)

The economists highlighted that recent tariff reductions and trade negotiations have decreased some global risks, with US tariffs having minimal direct impact on South Africa’s exports.

Market Consensus vs. BofA’s Projection

While BofA expects cuts in May and July, most economists predict the Monetary Policy Committee will maintain current rates in May. The decision may hinge on:

• The upcoming budget’s reception
• Political stability within the GNU
• Global economic conditions

“A positive market reaction to the budget could pave the way for rate cuts,” BofA noted, suggesting that favorable conditions might lead to reductions at either the July, September, or November meetings.

Recent MPC Meeting Outcomes

Source: BusinessTech