The South African Reserve Bank (SARB) is likely to follow what the US Federal reserve does.
Image: Simphiwe Mbokazi / Independent Newspapers.
On the eve of the South African Reserve Bank’s interest rates announcement, the big question is: Will South Africa follow Donald Trump?
The President of the USA, the world’s biggest economy said with the oil price going down, he will demand that interest rates drop immediately and likewise, they should be dropping all over the world.
“Interest rates should follow us. All over the world, the progress that you’re seeing is happening because of our historic victory in the recent presidential election, one that has become quite well-known throughout the world.
"I think a lot of things are happening to a lot of countries. They say that there is light shining all over the world since the election. Even countries we are not particularly friendly with are happy,” Trump said.
On Wednesday morning, Reezwana Sumad, Nedbank CIB research analyst, said: “A number of central bank interest rate decisions are scheduled over the course of the next few days; this evening, we have the Federal Reserve’s (Fed’s) FOMC and tomorrow, the SARB MPC-this while the SA parliament grapples with the proposed budget."
Nigel Green, deVere Group’s CEO, said the Federal Reserve is set to leave interest rates unchanged today, but markets need a definitive signal that cuts are coming soon.
The global independent financial advisory and asset management organisations said this was as US central bank officials at Wednesday’s meeting are expected to hold interest rates steady at between 4.25%-4.5%, but modify their views on the economy.
“The Fed’s key interest rate remains restrictive in an economic landscape where inflation is cooling, growth is slowing, and external risks due to tariffs, among other factors, are rising.
“The latest US Consumer Price Index (CPI) data shows inflation easing to 2.8% year-on-year, down from 3% in January. Monthly inflation ticked up just 0.2%, a steep drop from the prior month’s 0.5% gain.
“Meanwhile, key industries are showing signs of strain, wages are climbing faster than expected, and inflation expectations have surged in recent weeks.
“Against this backdrop, the Fed needs to act pre-emptively rather than reactively. Investors, businesses, and consumers all need clarity that monetary policy will evolve to meet shifting economic realities.”
Adding to the urgency is the growing threat of trade disruption. Trump’s tariff threats risk driving up consumer prices while simultaneously weighing on growth.
“This dangerous mix puts the Fed in a precarious position: delay action for too long, and the economy could tip into a recession,” Green noted.
He continued: “A well-signalled pivot toward rate cuts would provide stability and ensure inflation expectations remain anchored.
“A clear indication today that easing will begin at the next meeting would restore market confidence, support equities, and relieve pressure on risk-sensitive currencies.
“The dollar’s trajectory will also be influenced by the Fed’s tone, as a dovish shift would likely weaken the currency, fueling momentum in global markets.”
Heightened volatility is expected if Jerome Powell and his colleagues fail to deliver a firm commitment and only provide vague reassurances, Green said.
Investors are no longer willing to wait indefinitely while the Fed assesses data.”
He said markets want certainty that the rate-cutting cycle will begin imminently, rather than be drawn into a prolonged and unnecessary delay.
“The Fed won’t move today, but it must make it clear that cuts are imminent. A lack of decisive communication could trigger market instability, while a well-telegraphed shift would provide a necessary cushion against emerging risks. The world is watching. The question now is whether the Fed will deliver,” Green said.
Neil Gopal, CEO of the South African Property Association(SAPOA), said the SARB is likely to follow what the US Federal Reserve does.
“However, given that South African February inflation numbers came in at 3.2%, unchanged from January, one would expect a .25 basis point decrease in rates. A drop would certainly help stimulate the markets.”
Adrian Goslett, CEO of RE/MAX SA and Chairman of the Real Estate Business Owners of South Africa(REBOSA), said while global economic factors, as well as statements and movements across the Atlantic Ocean, have certainly sent a few shockwaves across the globe, the data shows that inflation remains well below the median and very much inside the target range of the Reserve Bank.
“Homeowners and buyers, however, remain under financial pressure as the local economy still tries to get out of first gear. So, any assistance which would relieve household debt burdens would be well worth it,” Goslett said.
Raeesa Kader, the academic programme leader at the School of Accounting, Finance and Tax at the Management College of Southern Africa (Mancosa), said although a 25-basis point drop is still a possibility, they believe that the SARB will maintain interest rates.
“The Monetary Policy Committee (MPC) is known to take a cautious approach to avoid potential inflationary pressures, especially given global uncertainties such as trade wars and concerns like the impending VAT hike.
"The property and real estate sectors will, however, benefit and welcome a rate cut, given that inflation is well within the SARB's target range and below the 4.5% midpoint. A lower interest rate will make property investments more attractive and accessible,” Kader said.
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