South Africans can expect repo rate cuts by year-end

Economic reprieve might just be on the cards for South Africans after one last interest rate hike.

While the nation has been buckling under the pressure of the rising cost of living over the past year and a bit, auditing firm, PricewaterhouseCoopers (PwC) has found signs of hope for South Africans in its latest survey.

While interest rates are peaking with an expected final 0.25 percentage point increase later on Thursday (30 March 2023), Lullu Krugel, PwC South Africa chief economist, reckons that the tightening cycle will be over after this week. This could not only be the last interest rate hike we will likely see this year, but Krugel says that the repo rate could see a possible decrease.

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Krugel’s colleague at PwC, senior economist Christie Viljoen said: “We see room for the repo rate to start declining late this year as inflation moderates towards the midpoint of the SARB’s 3%-6% target range.

“The key factor here is the speed at which inflation is able to moderate. There have been many media reports over the past month about consumer goods companies (including food producers) warning of more supply chain price pressure that will need to be passed on to consumers this year.”

Less hopeful view from global economic lens

PwC counterpart, KPMG’s Global Economic Outlook report for H1 2023, was less optimistic though, looking at SA from a global economic lens.

The firm said that while global energy prices are slowly but surely returning to levels last seen prior to the invasion of Ukraine, major economies throughout the world – most recently the UK and USA – are still facing their own domestic pressures, which in turn was delaying any hopes of improving market conditions and a drop in inflation.

Yael Selfin, chief economist at KPMG in the UK, said: “We expect global economic growth to be relatively modest over the next two years, and to stay below its long-term average. Global growth is expected to be driven by the recovery of the Chinese economy and a relatively strong growth in some of the emerging markets, while Eurozone and the US economy are expected to contribute less to global growth over the next two years.”

ALSO READ: Repo rate increases not quite over, but relief is within sight

Later on Thursday (30 March 2023), the governor of the South African Reserve Bank is expected to deliver the repo rate announcement. Economist have predicted that the interest rate will be hiked by 25 to 50 basis points.