{"id":868509,"date":"2026-08-03T14:00:00","date_gmt":"2026-08-03T12:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=868509"},"modified":"2026-08-03T12:58:35","modified_gmt":"2026-08-03T10:58:35","slug":"make-or-break-for-the-south-african-reserve-bank","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business-opinion\/868509\/make-or-break-for-the-south-african-reserve-bank\/","title":{"rendered":"Make or break for the South African Reserve Bank"},"content":{"rendered":"\n

The recent decision by the South African Reserve Bank to keep interest rates unchanged has placed the central bank under the microscope over its ability to hit its new 3% inflation target. <\/p>\n\n\n\n

The South African Reserve Bank decided to keep interest rates on hold at its July Monetary Policy Committee (MPC) meeting, leaving the repo rate at 7.0% and the prime rate at 10.5%. <\/p>\n\n\n\n

The six-member MPC were split over the decision, with four calling for a hold and two calling for a 25 basis point hike. <\/p>\n\n\n\n

The move came one day after Stats SA data showed that inflation reached 5.0% in June, which is well above the one percentage point tolerance band for the new 3% target. <\/p>\n\n\n\n

Finance Minister Enoch Godongwana reduced the inflation target from its previous 4.5% midpoint to 3% last year, following widespread requests from the SARB. <\/p>\n\n\n\n

The decision was supported by muted inflation in South Africa, with inflation averaging around 3% for much of 2024 and 2025. <\/p>\n\n\n\n

The SARB was even expected to cut interest rates at the start of the year as inflation was largely contained. <\/p>\n\n\n\n

However, the US and Israel’s attacks on Iran and the subsequent closure of the Strait of Hormuz led to a massive rise in oil prices and a massive rise in petrol prices.<\/p>\n\n\n\n

While the Reserve Bank hiked rates in May, the MPC decided to keep rates unchanged at its July meeting. <\/p>\n\n\n\n

The central bank noted that the country\u2019s monetary policy was restrictive enough to make a second consecutive rate hike unnecessary. The surprise decision led to a weakening of the rand. <\/p>\n\n\n\n

Reputation on the line <\/h2>\n\n\n
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Sean Neethling, Head of Investments at Morningstar Investments South Africa, told BusinessTech that the Reserve Bank is now facing a test of its credibility. <\/p>\n\n\n\n

Given the SARB’s push to lower the inflation target, it will be scrutinised for every interest rate decision and its ability to reach the 3% target. <\/p>\n\n\n\n

Neethling noted that inflation is well above the SARB’s 3% target range. This places the SARB in a tough situation, as higher interest rates would theoretically bring inflation down, but also limit economic growth. <\/p>\n\n\n\n

He added that South Africa has to be a price-taker for interest rates. To attract capital, South Africa often needs to offer real returns that are attractive to investors. <\/p>\n\n\n\n

If the United States Federal Reserve were to hike rates, Neethling believes this would force the SARB to do the same. <\/p>\n\n\n\n

Neethling admitted that predicting US Monetary Policy has become more challenging, given the recent appointment of Kevin Warsh as chair.<\/p>\n\n\n\n

While the US has also seen elevated inflation, the Fed decided to keep interest rates unchanged last week. <\/p>\n\n\n\n

The Reserve Bank itself has warned that additional interest rate hikes are possible for the future, especially if inflation expectations remain elevated. <\/p>\n\n\n\n

The central bank also stated that if oil prices remain high, another interest rate hike would be possible. This would be the case if global oil prices remain around $100 per barrel and only drop lower in 2029.<\/p>\n\n\n\n

However, if oil prices fall to roughly $78 per barrel and decline further, an additional interest rate hike may not be necessary.
<\/p>\n","protected":false},"excerpt":{"rendered":"

The Reserve Bank is under intense scrutiny following the decision to lower the inflation target to 3%. <\/p>\n","protected":false},"author":95,"featured_media":857007,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"posted","_sma_x_autopost_error":"","_sma_x_post_id":"2084248173820723524","_sma_facebook_post_id":"191437357620492_2165488744271525","_sma_instagram_post_id":"18042632168802879","_sma_x_attempts":1,"footnotes":""},"categories":[4],"tags":[16554],"class_list":["post-868509","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-opinion","tag-morningstar-investments"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/868509","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=868509"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/868509\/revisions"}],"predecessor-version":[{"id":868522,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/868509\/revisions\/868522"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/857007"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=868509"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=868509"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=868509"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}