Will the SARB cut interest rates? Experts weigh in on the 25 basis point prediction

Experts weigh in

- YOGASHEN PILLAY

DEBT experts and economists believe that an interest rate cut of 25 basis points is likely when the Monetary Policy Committee (MPC) meets on Thursday.

This follows Statistics South Africa announcement last week that CPI inflation edged up slightly from 2.7 % in March 2.7% to 2.8% in April

Reza Ismail, the head of bonds at Prescient Investment Management, said that he believes there will be an interest rate cut on Thursday. “The observed 3-month Johannesburg Interbank Average Rate (JIBAR) of 7.45% and the 1x4 FRA (Forward Rate Agreement) at 7.26% suggest that markets are currently pricing in a modest easing bias. This reflects a forward rate expectation approximately 20 basis points below the current 3-month interbank rate, implying a probability-weighted scenario of a 25 basis point repo rate cut at the May 29th MPC meeting.”

Ismail added that the term structure of FRA rates from 1x4 to 21x24 remains anchored within the 7% range, indicating expectations of modest further easing over the medium term, but not a sustained or aggressive cutting cycle.