South Africa Trims Key Policy Rate as Expected

The South African Reserve Bank kept its key repo rate unchanged at 6.75% on January 29, 2026, as widely expected, after a 25 bps rate cut in November. The decision was not unanimous, with two members favoring a 25-basis-point cut. Policymakers noted that, although the inflation outlook is improving, they aim for a further drop in inflation expectations and remain watchful of potential price pressures from electricity tariffs. Uncertainty in global politics also weighed. The SARB revised its inflation forecasts, lowering the 2026 estimate to 3.3% from 3.5%, while slightly raising the 2027 forecast to 3.2% from 3.1%. Governor Lesetja Kganyago said that inflation is expected to reach the new 3% target by 2028. The bank sees growth at an unchanged 1.4% this year and 1.9% next year. The SARB'S quarterly projection model continued to show gradual cuts, with the benchmark rate declining to 6.31% by end-2026 and 6.05% by the end of the next year.

The South African Reserve Bank cut its key repo rate by 25 bps to 6.75% on November 20, 2025, as widely anticipated, after keeping it unchanged at 6.50% in September. The decision was unanimous, with officials agreeing that policy can now be eased amid a more favorable inflation outlook and balanced growth risks. Policymakers noted that inflation has accelerated somewhat over the past few months, reaching 3.6% for October, but they expect this to be temporary, with inflation remaining on track to meet the new 3% medium-term target. The inflation forecasts for 2025 and 2026 were slightly revised downward to 3.3% (from 3.4%) and 3.5% (from 3.6%), respectively. Regarding economic activity, the SARB raised its 2025 growth forecast to 1.3% (previously 1.2%) and maintained the 2026 projection at 1.4%. Looking ahead, the central bank noted that its Quarterly Projection Model continues to forecast gradual rate cuts as inflation subsides.

The South African Reserve Bank left its key repo rate unchanged at 7% on September 18, 2025, as widely anticipated, signaling caution amid global uncertainty while preparing to adopt a new 3% inflation target. The decision was not unanimous, with four members voting to keep rates unchanged and two favoring a 25-basis-point cut. Since September last year, rates have been reduced by 125 basis points, and policymakers said they are pausing to assess the impact on the economy, evolving expectations, and inflation risks. They observed that headline inflation has risen recently as expected and is projected to peak in the near term, averaging 3.4% in 2025 and 3.6% in 2026—slightly higher than the previous forecast—before easing back to 3% in 2027. Meanwhile, the 2025 growth forecast was raised to 1.2% from 0.9% after Q2 GDP exceeded expectations, with modest gains expected in the coming years, aided by structural reforms, despite export headwinds from higher tariffs.