The South African Reserve Bank (SARB) Monetary Policy Committee has voted to hold South Africa\u2019s interest rates.<\/p>\n\n\n\n
This leaves the repo rate at 6.75% and the prime lending rate at 10.25%. The decision was not unanimous, with four members of the MPC voting to hold and two voting to cut by 25 basis points.<\/p>\n\n\n\n
Reserve Bank governor Lesetja Kganyago said that 2025 proved to be a year filled with uncertainty and significant imbalances across markets.<\/p>\n\n\n\n
“Despite these fragilities, asset prices have been resilient and global growth is holding up, supported by investments in AI, as well as fiscal stimulus in major economies,” he said.<\/p>\n\n\n\n
“Inflation generally slowed last year, and many central banks have had space to adopt more neutral policy settings. Financing conditions for emerging markets remain benign.”<\/p>\n\n\n\n
While growth forecasts for South Africa have improved, the main growth driver has been household consumption, up by more than 3% last year, compared to an estimated 1.3% for the overall economy.<\/p>\n\n\n\n
At the same time, investment has been weak, he said, contracting during the first half of 2025. <\/p>\n\n\n\n
“Our forecasts continue to show growth moving somewhat higher, approaching 2% over the medium term. We see some upside risks to these projections,” he said.<\/p>\n\n\n\n
Notably, the governor said that the SARB believes that local inflation peaked in December at 3.6%, with the expectation that it will now continue to fall.<\/p>\n\n\n\n
However, there are concerns about food inflation, driven by the outbreak of Foot and Mouth Disease, as well as a rise in administered costs, such as electricity prices, where Eskom is looking to draw billions of rands more from consumers.<\/p>\n\n\n\n
Overall, inflation expectations are lower, though, with risks to the inflation outlook seen as balanced.<\/p>\n\n\n\n
Against the backdrop of higher global uncertainty and a gradual slowing of inflation locally towards the 3% target, the SARB elected to hold rates.<\/p>\n\n\n\n
The decision was broadly in line with market expectations, where the outcome was seen as a close call, though tilted to a hold.<\/p>\n\n\n\n
Most commentators flagged the SARB’s new 3% inflation target as the biggest sticking point for cuts, noting that the MPC would likely opt to wait and see how previous cuts played out in the economy.<\/p>\n\n\n\n
Adding to the view is uncertainty in global politics, with the United States again proving to be a source of volatility in trade. This was reflected in the SARB’s statement.<\/p>\n\n\n\n
This was also seen in the US Fed’s decision to hold rates on Wednesday (28 January), which also added support to the call on a hold.<\/p>\n\n\n\n
On the other hand, several economists and analysts argued that the strong rand rally, benign inflation, and positive sentiment toward South Africa presented a prime opportunity to cut.<\/p>\n\n\n\n
Looking ahead, South Africa’s rate-cutting cycle is expected to continue, despite the hold. Forecasts are for 50 bps of cuts in 2026, with a possible 25 bps cut in 2027.<\/p>\n\n\n\n
The SARB’s Quarterly Projection Model continues to forecast gradual rate cuts as inflation subsides. <\/p>\n\n\n\n
The model interprets the policy stance as moderately restrictive currently, with rates reaching neutral levels during 2027. <\/p>\n\n\n\n
“As before, this rate path remains a broad policy guide. Our decisions will continue to be taken on a meeting-by-meeting basis, with careful attention to the outlook, data outcomes, and the balance of risks to the forecast,” Kganyago said.<\/p>\n","protected":false},"excerpt":{"rendered":"
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