The South African Reserve Bank (SARB) is expected to maintain its benchmark interest rate at 7.50% during its March 20th meeting, according to a Reuters poll of 22 economists. Sixteen predicted no change, while six forecast a 25-basis-point cut, reflecting lingering economic uncertainties tied to global trade risks and domestic budget negotiations.

Finance Minister Enoch Godongwana’s proposed value-added tax (VAT) hike has faced opposition from political parties, complicating fiscal planning for the African National Congress-led minority government. Goldman Sachs' Andrew Matheny noted that this budgetary uncertainty reinforces the likelihood of the SARB adopting a cautious stance in March.

Inflationary pressures are also weighing on the central bank’s decision. Inflation rose to 3.2% in December, with forecasts suggesting it will average 4.0% in 2025 and 4.5% by 2026. The proposed VAT increase and a depreciating rand pose potential upside risks to inflation, according to Shannon Bold of the Bureau of Economic Research.

Economic growth is projected to remain tepid, with expansions of 1.7% this year and 1.8% in 2026. While rate cuts are anticipated later this year, fiscal and trade uncertainties, coupled with inflation risks, leave policymakers navigating a delicate balance.

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