The South African Reserve Bank (SARB) will likely lower interest rates by 25 basis points on Thursday, despite a larger-than-expected overnight move by the Federal Reserve as it turns the screws on inflation.

Almost all of the 24 economists surveyed by Bloomberg expect Governor Lesetja Kganyago to reduce the rate from a 15-year high to 8% when he announces the decision after 3 pm at a press briefing north of Johannesburg. It will be the SARB’s first easing since the pandemic in 2020.

A 50 basis-point cut by the Fed isn’t going to change that, according to economists at Rand Merchant Bank, who saw the six-member monetary policy committee constrained by the narrow gap between the US and South Africa’s real — or inflation-adjusted — rates of interest.

“We find this to be improbable,” Keabetswe Mojapelo and Manqoba Madinane said in a note in which they reiterated their view of a quarter-point reduction. “The SARB has highlighted that real rates in South Africa are already low and do not offer the same buffer as in other emerging markets, limiting their capacity for aggressive cuts.”

South Africa’s real rates have reached the highest level in 19 years after price pressures cooled. Data on Wednesday showed annual inflation slowed to 4.4% in August from 4.6% the prior month, widening the gap to the central bank’s policy benchmark to 385 basis points — the most since July 2005.

While the real rate “is relatively high, the difference between its real policy rate and that of the US is historically low, constraining the SARB’s actions significantly,” said Albert Botha, head of fixed income at Ashburton Investments.

Still, the decision may be close, with economists in a separate survey expecting the MPC to be split on the decision, with most members favouring a quarter-point reduction.

Price pressures, for the first time in more than three years, have now moved below the midpoint of the central bank’s 3% to 6% target band where it prefers to peg expectations. But policymakers have been disappointed before by the failure of inflation to cool as forecast and are expected to be cautious, at least as they get the easing cycle underway.

“I don’t think the Reserve Bank will follow 50,” said Old Mutual Group Chief Economist Johann Els. “But by November the Reserve Bank will very likely cut by 50 as well because by that time the Fed would’ve cut again.”

His bets hinge on forecasts for the rate of inflation to slow to 3.6% by the time the SARB announces its final policy decision of the year on November 21.

“By the time the Reserve Bank comes to November, it will be very difficult for them to not cut by 50 if our inflation is below 4% and the rand is strong and the Fed has cut more,” Els said.