South Africa Lifts Key Policy Rate as Predicted

The South African Reserve Bank raised its key repo rate by 25 basis points to 7.25% on September 23, as widely expected, citing the need to bring inflation back toward its target. The decision was unanimous, reflecting upside risks to inflation and downside risks to economic growth. Consumer price inflation edged up to 4.4% in August from 4.3% in July, remaining close to the midpoint of the Reserve Bank’s 3%–6% target range. Policymakers said headline inflation is likely to rise above 5% later this year and in early 2027, driven by higher fuel prices, before slowing as the fuel-price shock recedes. Inflation is expected to return to around 3% toward the end of 2027. Accordingly, inflation forecasts were revised higher to 4.4% in 2026 (from 4.0% previously), 4.0% in 2027 (from 3.8%), and 3.2% in 2028 (from 3.1%). Regarding economic activity, the SARB cut its 2026 growth forecast to 1.2% (from 1.4%) but maintained the 2027 and 2028 projections at 1.7% and 1.9%, respectively.

The South African Reserve Bank kept its key repo rate unchanged at 7% on July 23, surprising most analysts who had expected a 25-basis-point increase, as policymakers sought to support a fragile economic recovery despite persistent inflation risks. The Monetary Policy Committee voted 4–2 to hold rates, citing a slightly improved inflation outlook and weaker growth, while reaffirming its objective of steering inflation toward its 3% target over time. Governor Lesetja Kganyago warned that renewed conflict in the Middle East, which has driven up oil and fertilizer prices, could warrant further tightening if higher fuel costs spill over into food prices and core inflation. South Africa’s annual inflation accelerated to 5% in June, although the central bank now expects inflation to average 4% in 2026, down from its previous forecast of 4.4%. The SARB also raised its 2026 growth forecast to 1.4% from 1.2%, while cautioning that economic momentum could weaken in the coming quarters.

The South African Reserve Bank raised its key repo rate by 25 bps to 7% on May 28, 2026, as widely expected, marking its first rate hike since 2023. Four of the six members of the MPC backed the decision, while two voted to hold. The committee said inflation risks had increased due to the Middle East crisis and warned that overlapping shocks could trigger second-round effects, justifying a monetary policy response to contain risks and bring inflation back to target. South Africa’s inflation rate climbed to 4% in April from 3.1% in March, now sitting at the upper end of the central bank’s target range. Overall, Inflation forecasts were raised to 4.4% for 2026 (from 3.7%) and to 3.7% for 2027 (from 3.3%). Regarding economic activity, the central bank lowered its growth forecasts for 2026 to 1.2% (vs 1.4%) and for 2027 to 1.7% (vs 1.9%). The policy statement was again accompanied by three alternative scenarios, all pointing to some additional monetary policy tightening.