Reserve Bank hold rates steady

In the context of heightened global uncertainty, the United States continues to contribute to volatility in international trade. Despite these challenges, inflation rates generally slowed in the previous year, providing central banks with the flexibility to shift towards more neutral policy stances. As a result, financing conditions for emerging markets have remained favourable.

The South African Reserve Bank (SARB) indicated that local inflation likely reached its peak in December 2025 at 3.6%. Their expectation is that inflation will continue to decline from this point onward. The Monetary Policy Committee (MPC) views the risks to the inflation outlook as balanced, suggesting a stable environment going forward. Furthermore, the SARB’s Quarterly Projection Model continues to anticipate gradual reductions in interest rates as inflation eases.

According to a Reuters survey, 69.23% of economists predicted that there would be no change to the repo rate. Reflecting this sentiment, the MPC voted to keep South Africa’s interest rates unchanged. The current repo rate remains at 6.75%, while the prime lending rate stands at 10.25%. However, the decision was not unanimous: four members voted to hold rates steady, and two members favoured a 25 basis point reduction.

Governor Lesetja Kganyago highlighted that the central bank considers prevailing conditions supportive enough to pause after a rate cut implemented in November 2025. While borrowing costs remain elevated, this stance signals the bank’s confidence that inflation will remain under control. The SARB projects inflation to be around 3% in 2026, creating potential for further interest rate cuts later in the year.