Inflation rises in June, but optimism for a repo rate cut remains
Image: File
Despite Consumer Price Inflation (CPI) rising to 3% in June, there is still optimism that the South African Reserve Bank's Monetary Policy Committee (MPC) will decide to cut the repo rate by 25 basis points next week.
The MPC meets next Thursday. At the last meeting in May it cut the interest rate to 7.25%.
The CPI has risen from 2.8% in May.
Trade union UASA's spokesperson Abigail Moyo said the rise in inflation is troubling, especially since it had been below 3%—the lower limit of the SARB's target band—between March and May.
The union noted that according to Stats SA, the main contributors to the annual inflation rate were housing and utilities, which increased by 4.4%, and food and non-alcoholic beverages, which rose by 5.1%. Additionally, household electricity and gas prices increased by 11% compared to the previous year, primarily due to recent Eskom price hikes. Eskom's electricity tariffs increased in April, while municipal power tariffs took effect in July.
'This has posed significant financial challenges for many consumers, evidenced by recent protests organised by Tembisa residents against these tariff increases.'
However Moyo said the inflation rate, while slightly higher, remains in line with inflation targets and expectations, potentially supporting a cut in the repo rate by 25 basis points to 7% next Thursday.
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'UASA hopes the MPC will consider the positives in its repo rate decision and that fuel prices will decrease in August, benefiting consumer spending. We further hope that inflation will stay within the 3% target range or lower.'
Bradd Bendall, BetterBond's national head of sales said BetterBond's data for July shows that bond applications have risen by 7.4% for the 12 months to May 2025, with home loans granted up by an impressive 13.6%.
'This points to renewed buyer confidence and a more stable market environment. Driving this upward trend is the recent easing of interest rates.'
Bendall added that with inflation recently comfortably within the 3 to 6 percent target range, another 25 basis point rate cut was expected next week.
'This would drop the prime lending rate to 10.5% - last seen in November 2022. Although not quite at pre-pandemic levels, this cut would bring welcome relief to homeowners and consumers. On a R2 million bond, for example, the lower prime lending rate would mean a saving of just over R300 a month.
'This potential cut aligns with global monetary policy trends. Both the Bank of England and the Reserve Bank of India are both expected to reduce rates in August, suggesting a broader shift toward interest rate easing to stimulate economic activity.'
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