South African consumers hoping for imminent interest rate relief have been dealt a blow, with the latest inflation data dimming the prospects of a cut in November.
While September’s headline inflation of 3.4% was within market expectations, it confirmed a worrying trend: price pressures are on the rise again after a surprise drop in August. This upward swing has cemented the view that inflation will heat up in the coming months, moving further away from the South African Reserve Bank’s (SARB) newly “preferred” target of 3%.
Governor Lesetja Kganyago this week reiterated that the central bank is “deadly serious” about pursuing this target. This hawkish stance, combined with confirmed price pressures from rising electricity tariffs and persistent food costs, has led economists to doubt a rate cut in 2025 is still feasible.
The timing of expected cuts in 2026 is now also uncertain. Nedbank economists project inflation will trend towards 4% by year-end, with averages of 4% for 2026 before moderating.
Despite this, the general consensus is that the rate-cutting cycle has not ended, but is merely paused. Financial markets still see a 60% chance of a cut in November, and analysts point to a stronger rand, falling inflation expectations, and a sluggish economy as factors that could still encourage the SARB to act.
The final decision rests with the Monetary Policy Committee, which will announce its verdict on November 20th. The meeting is set to be a tense one, balancing the fight against inflation against the need to stimulate a struggling economy.
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