Physical address
4 Merchant Place Corner Fredman Drive and Rivonia Road Sandton 2196
Postal address
PO Box 650149 Benmore 2010
The FNB House Price Index growth averaged 0.8% y/y in December, marginally higher than the 0.7% in November (revised from 0.5%), and a low of 0.5% in October.
The Monetary Policy Committee (MPC) has already lowered the policy rate from 8.25% at the start of 2024 to 6.75% by the end of 2025. However, even with this, policy remains restrictive by our estimate of the rate that is neutral on the economy and considering expected inflation. The question is, how restrictive does the MPC plan on keeping policy to influence pricing behaviour sufficiently and ensure that medium-term inflation is anchored at 3%? We may not have an answer to this question yet, but there are multiple factors that could shift the MPC in different directions. Therefore, to the question of whether the MPC will cut interest rates again at their upcoming meeting on 29 January, the answer is yes, no, and maybe.
South Africa's economic growth in 2025 is estimated to have been at around 1.3%, roughly double the pace recorded in 2024. This outcome was largely underpinned by robust consumer spending, reflecting tailwinds from lower inflation, interest-rate cuts, withdrawals under the two-pot retirement system, and stable income growth. Agricultural activity also strengthened, supported by a record bumper harvest. By contrast, private-sector fixed investment remained subdued, constraining overall GDP growth. The continued easing of structural constraints, particularly improvements in electricity supply and efforts to enhance capacity and operational efficiency in rail and ports, will remain critical to sustaining economic growth over the near-to-medium-term.
After troughing at 2.1% y/y in May 2020, due to a lockdown-driven fall in demand and statistical imputations, headline inflation accelerated to 5.2% y/y in May of 2021. CPI weights are typically updated at least every five years, in line with international standards. New weights will be introduced with the January 2022 data and the base year will change to December 2020.
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Physical address
4 Merchant Place Corner Fredman Drive and Rivonia Road Sandton 2196
Postal address
PO Box 650149 Benmore 2010