A Reuters poll of 30 economists was almost unanimous, with 29 forecasting the Monetary Policy Committee (MPC) will hold rates and one predicting a 50-basis point hike. The poll also forecast 75 basis points of cuts next year.

This would take the prime rate to 11% next year, bringing some relief to hard-pressed South African consumers while chipping away at one of the many obstacles to economic growth.

“The fact that inflation expectations came down most recently suggests that the Sarb’s hawkish rhetoric seems to be working. Inflation expectations and headline inflation have begun to move in the right direction, and the Sarb is likely to stay put at its September meeting,” Jee-A van der Linde, senior economist at Oxford Economics Africa, told Daily Maverick.

South African Reserve Bank (Sarb) governor Lesetja Kganyago has repeatedly unfurled the talons of a hawk, maintaining that the tightening cycle has not peaked and that the MPC stands ready to hike again to contain inflation. 

Still, after raising rates by 475 basis points between November 2021 and May 2023, the Sarb – which held rates steady in July – has room to keep its finger off the tightening trigger.

The Consumer Price Index (CPI) slowed to 4.7% in July from 5.4% in June, bringing it to the middle of the Sarb’s 3%-6% target range – a trend that the central bank will see as vindication of its policy stance. The August CPI will be unveiled on Wednesday, 20 September, the day before the MPC gives its decision.

One likely scenario is that the MPC leaves rates unchanged while taking a hawkish tone in its statement as inflationary pressures remain.

Food inflation in July remained in double-digit territory at 10%, and while global food prices have generally been falling, South Africa faces egg and possibly poultry shortages linked to avian flu outbreaks. This will exert inflationary pressures on these key sources of protein.

The surge in rolling power cuts this month will add to the costs of retailers and other businesses as they burn diesel to keep the lights on, and this is one of the fuels of domestic inflation – the Sarb estimates that the blackouts add 0.5 percentage points to South African inflation.

And in the long term, the El Niño weather pattern is seen heralding drought in South Africa and the wider region against the backdrop of record-high temperatures globally.

Read more in Daily Maverick: It’s here — El Niño has finally arrived, according to US National Weather Service

Meanwhile, global crude oil prices have raced to their highest levels this year above $90 a barrel as supply cuts by major producers such as Saudi Arabia and Russia bite, while the rand remains fragile as it hovers near the $19 mark. 

Another key factor at play here is US inflation and interest rates. A Reuters poll sees the US Federal Reserve holding rates steady at the end of its policy meeting on 19-20 September, but is not seen trimming before April 2024. 

The Sarb will be mindful of all of these elements and, among other things, is unlikely to begin its own cutting cycle next year in advance of the Fed. At least for now, South African consumers are unlikely to need to budget for another spike in their debt repayments. DM