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Weekly Interest Rate Outlook

 

 

 

 

 

 

Inflation Alert: A Gentle Nudge Higher, But Relief Looms

 

South Africa's consumer prices rose to 3.4% year-on-year in September, up from 3.3% in August. This modest uptick, driven by food and fuel costs, keeps us just above the Reserve Bank's 3% midpoint target. Yet, core pressures remain contained at 3.5%, signalling no immediate alarm.

 

 

Markets in Motion

 

The rand holds firm at 17.44 to the dollar, buoyed by global risk appetite. The JSE All Share index climbed 1.2% this week, lifted by mining gains amid steady commodity prices. Bond yields eased slightly, reflecting bets on steady policy ahead. Home loan applications surged 14% year-on-year, per bond originator data, as buyers eye potential relief.

 

Inflation's Ripple Effect

 

This updrift tempers household spending and squeezes SME margins, yet GDP growth hit a two-year high of 0.6% in Q2. Locally, electricity tariff hikes and wage pressures add friction, while a rebounding housing market cushions the blow. Internationally, the US Federal Reserve's recent 25 basis point cut narrows rate differentials, supporting the rand and curbing import inflation. Softer global oil at $72 per barrel and stable metals prices further tame imported costs.

 

Our Barometer: Hold Steady, Cuts on Horizon

 

Cromox's proprietary gauge pegs a 60% chance of no change at the November MPC meeting, with the repo rate anchored at 7%. A trim to 6.75% sits at 35% odds, barring fresh upside risks. Upside hikes? Near zero, given subdued growth forecasts of 1% for the year. Expect gradual easing into 2026, targeting 6.25% by mid-year, as inflation anchors lower.

 

^{Disclaimer: This outlook is based on local research and market analysis. It reflects current trends and projections, but economic conditions can shift. Cromox Ultimate Finance accpets no liability for any errors or omissions. This update is provided for information purposes only and should not be construed as financial advice.}