SARB delivers a 25bp cut and hints at a lower inflation target

Momentum Investments have released their macro research note titled “SARB delivers a 25bp cut and hints at a lower inflation target” prepared by the Momentum Macro Research Team.

The announced 25 basis point-interest rate cut at the May 2025 meeting brings the cumulative easing to 100 basis points since the cutting cycle started in 2024. While the easing process has been more staggered than expected, the implemented cuts have offered some relief to debt-laden consumers and will continue to do so. Despite the interest rate cuts, the real interest rate remains restrictive due to subdued inflation outcomes.

Recent remarks by government officials suggest progress on lowering the inflation target range. Given the voting outcome where one member preferred a 50-basis point cut, along with headline inflation forecasts expected to undershoot the midpoint of the target range and a scenario showing that a lower inflation target could be achieved without raising interest rates (in fact, by cutting them), we believe another 25-basis point rate cut this year cannot be

SARB interest rate decision - 29 May 2025 (pdf).