Consumers can breathe little easier as repro rate remains unchanged

This week saw the Reserve Bank’s (Sarb) Monetary Policy Committee (MPC) keep the repo rate unchanged at 6.75%. The experts weigh in on the decision and what it means for the economy, consumers, home and vehicle repayments and debt.
This week saw the Reserve Bank’s (Sarb) Monetary Policy Committee (MPC) keep the repo rate unchanged at 6.75%. (Image source: © 123rf )
This week saw the Reserve Bank’s (Sarb) Monetary Policy Committee (MPC) keep the repo rate unchanged at 6.75%. (Image source: © 123rf 123rf)

Momentum Investments chief economist, Sanisha Packirirsamy and economist, Tshiamo Masike are of the opinion that the SARB remains focused on preserving policy credibility and anchoring inflation expectations, rather than reacting to near-term inflation outcomes.

“Our expectation of gradual rate cuts, amounting to two 25-basis point reductions by the end of 2026, remains intact.”

They cite the Sarb’s QPM and voting pattern of the MPC members in the January meeting as an indication that rate cuts are still firmly on the table.

“The MPC's decision to keep the repo rate steady at 6.75%, despite lower inflation forecasts, reflects the Sarbs’s) cautious stance.

“Risks to the inflation outlook are seen as balanced, though there are issues of concern such as meat inflation, electricity prices, currency volatility, global market instability and geopolitical uncertainty.

Encouragingly, they say scenario analysis suggests inflation should stay within the 2% to 4% tolerance range, even under adverse conditions.
“The SARB appears committed to maintaining policy credibility and anchoring expectations.

“Nevertheless, we still expect a gradual rate cut of two 25-basis-point cuts each by the end of 2026. The SARB’s Quarterly Projection Model (QPM) and two MPC members voting for a 25-basis point cut in the January meeting also indicate that rate cuts are still firmly on the table.”

A case for a rate cut

NWU Business School economist Prof Raymond Parsons says, “‘As widely expected, the MPC by a 4-2 majority opted to pause its interest rate easing cycle and leave the repo rate unchanged for now.”

The MPC majority view provided a plausible case as to why it was considered necessary to further entrench inflationary expectations amid ongoing global uncertainty before making a further cut in borrowing costs for business and consumers.

The MPC statement outlined the various factors that shaped its assessment of the risks to the inflation outlook as being ‘balanced’.

However, he says, the minority MPC view had a more convincing case for an immediate rate cut of another 25 bps.

“The latest data indeed showed that the inflation outlook had improved sufficiently to justify earlier policy relief, rather than extending the pause.
“The MPC statement itself emphasised that Inflationary expectations are now at their lowest level in years.

“Despite a mild recent uptick in CPI, inflation is therefore generally expected to remain comfortably within the 2%-4% target range, indicating that inflation is increasingly becoming anchored.”

With the SARB committed to a gradual and flexible transition toward a 3% inflation target, he says, disinflationary forces are therefore likely to continue to prevail.

“The balance of risks to inflation outlook could therefore now instead be reasonably described as tilted to the downside.”

He adds that real interest rates in South Africa also remain relatively high by global standards, with the MPC statement conceding that monetary policy remains in restrictive territory.

“The SARB’s GDP growth forecast for 2026 is still only 1.4%.

“Nonetheless, the good news is that the MPC’s latest statement confirms that, on present trends, lower borrowing costs for businesses and households remain likely over the course of 2026 - even if further policy easing is deferred for now.”

Economy

Frank Blackmore, lead economist at KPMG South Africa, says that the reasons cited for keeping interest rates on hold were the number of risks that remain.

“Although these risks are viewed by the Reserve Bank as broadly balanced, they still pose upside risks to inflation.

“Most notably, these include external risks such as geopolitical and trade-related pressures facing South Africa, as well as internal risks, including potential increases in administered prices, particularly electricity tariffs.

Consumer

Hayley Parry, money coach and facilitator at 1Life’s Truth About Money says the decision

brings certainty, but not relief, for South African households.

“Many consumers may have been expecting an interest rate cut, particularly given that economists are forecasting reductions of up to 0.5 percentage points by the end of the year.

“While today’s decision does not ease financial pressure, it does provide much-needed certainty.

He says this certainly matters because when households know their repayments, especially monthly bond and loan repayments, will remain unchanged, they are better able to plan and manage their finances, even in a strained environment.

“Predictability allows consumers to budget more effectively and avoid unexpected shocks.”

Importantly, He adds that this decision comes just as the South African government prepares to announce its annual budget in February, making it an opportune time for households to review their own budgets for the year ahead, if they have not already done so.

“ Knowing that interest rates have not changed gives consumers the chance to stabilise their finances, identify areas where spending can be controlled, and prepare for the future.”

Should interest rate cuts materialise later in the year, this period of stability can be used strategically; either to pay down debt more aggressively or to set aside additional funds for savings or investment he expands.

“In that sense, while today’s announcement may be disappointing for those hoping for immediate relief, it provides a valuable window for financial planning and positioning ahead of potential rate cuts.”

Debt

Tando Ngibe, senior manager at Budget Insurance, says the decision for households means that their monthly debt repayments will not increase.

“If you have a home loan, financed car, personal loan or credit card tied to the prime interest rate, your instalments remain the same.

“The Reserve Bank says that global uncertainty, including cautious moves by the US Federal Reserve and risks like the rising cost of electricity, means they must move carefully before cutting further.”

The good news for him is that inflation remains contained and the stronger rand has helped ease some of the cost pressures.

“With inflation at 3.6% - still within the Bank’s target, price increases should remain moderate in the short term.”

He says this is a good time for consumers to review their budget.

“Keep paying down that high-interest debt, use the stability to build an emergency fund and avoid taking out new credit unless necessary, as future cuts are not guaranteed.

“For now, consumers can breathe a little easier, knowing that their repayments will remain steady and the economic outlook remains cautiously positive.”


 
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