{"id":869341,"date":"2026-08-11T10:30:00","date_gmt":"2026-08-11T08:30:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=869341"},"modified":"2026-08-11T10:18:43","modified_gmt":"2026-08-11T08:18:43","slug":"another-headache-for-the-reserve-bank-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/banking\/869341\/another-headache-for-the-reserve-bank-in-south-africa\/","title":{"rendered":"Another headache for the Reserve Bank in South Africa"},"content":{"rendered":"\n

The South African Reserve Bank (SARB) has been battling against South Africa’s high energy costs, but it is now also preparing for a possible rise in food inflation.<\/p>\n\n\n\n

Inflation in South Africa recently reached 5.0% in June 2026, and the SARB’s Monetary Policy Committee (MPC) surprised markets by keeping the repo rate steady at 7.0%. <\/p>\n\n\n\n

Inflation was above the SARB’s 3% inflation target, but the central bank argued that a prior May hike was sufficient to keep inflation contained. <\/p>\n\n\n\n

Notably, fuel price inflation accelerated to 12.7% during the month. Pump prices have risen dramatically following the war between the United States and Iran earlier this year. <\/p>\n\n\n\n

While the headline print was 5.0%, annual food price inflation, which is the largest part of the basket, slowed to 1.4%. <\/p>\n\n\n\n

Speaking at a media roundtable, members of the MPC, led by Governor Lesetja Kganyago, noted that food inflation fell as expected in June. <\/p>\n\n\n\n

Notably, the war in the Middle East has increased fertiliser prices and impacted supply chains. Many synthetic fertilisers need fossil fuels to create nitrogen. <\/p>\n\n\n\n

The rising costs come ahead of the planting season in South Africa and will feed into the costs. Kganyago said that fertiliser costs are elevated, but are coming down. <\/p>\n\n\n\n

Costs will also vary by planter and depend on when they ordered their fertiliser, making it difficult to judge the overall trajectory of food inflation. <\/p>\n\n\n\n

On top of the fertiliser challenges, an extreme El Ni\u00f1o is also expected in the coming months. <\/p>\n\n\n\n

El Ni\u00f1o is a weather pattern caused by warming in the tropical Pacific Ocean and leads to drought conditions in South Africa.<\/p>\n\n\n\n

This extreme weather is expected to have a severe impact on prices this year, with Kganyago stating that we should savour the low food inflation environment. <\/p>\n\n\n\n

The Reserve Bank still, however, sees inflation sticking around 4% in 2026, which is at the upper end of its tolerance band. <\/p>\n\n\n\n

Damned if you do, damned if you don’t <\/h2>\n\n\n
\n
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Members of the MPC<\/figcaption><\/figure><\/div>\n\n\n

The SARB’s senior leaders also fielded questions about its ability to reach its 3% target through monetary policy while allowing for economic growth. <\/p>\n\n\n\n

The MPC members noted that when it comes to interest rate hikes, they are “damned if you do, damned if you don\u2019t.” <\/p>\n\n\n\n

South Africa’s economic growth is expected to remain around 1% in 2026, following several years of muted growth. <\/p>\n\n\n\n

Given that the nation’s population grows at around 1.5% per year, the nation is likely in a per capita recession. <\/p>\n\n\n\n

However, the MPC members warned that allowing inflation to reach high levels would eventually lead to higher interest rates, which would be a stronger inhibitor of growth. <\/p>\n\n\n\n

The SARB’s leaders have repeatedly stressed that South Africa’s government needs to implement economic reforms to boost growth. <\/p>\n\n\n\n

It stressed that lower interest rates are simply not enough to ensure growth, and would result in a minute increase in short-term growth readings. <\/p>\n\n\n\n

Kganyago said the MPC remains united in its decisions, even when there are splits, such as the 4-2 vote in its July meeting, as members openly discuss their decisions. <\/p>\n\n\n\n

Kganyago added that a split between the members is often a signal to markets that the SARB itself is unsure what will happen in the current volatile environment. <\/p>\n\n\n\n

Given that his term ends in three years’ time, the Governor noted that the SARB has a “strong bench” of potential replacements, but the President will ultimately decide his successor. <\/p>\n\n\n\n

The MPC is also looking for a seventh member, with the Governor previously stating that he opposes a split vote, which would give him the deciding vote. <\/p>\n","protected":false},"excerpt":{"rendered":"

Amid the rise in energy prices, the Reserve Bank now also has to account for the possibility of rising food inflation.<\/p>\n","protected":false},"author":95,"featured_media":869366,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"failed","_sma_x_autopost_error":"Instagram publishing failed: Instagram returned HTTP 400: Media ID is not available","_sma_x_post_id":"2087094429983088749","_sma_facebook_post_id":"191437357620492_2172907833529616","_sma_instagram_post_id":"","_sma_x_attempts":1,"footnotes":""},"categories":[961],"tags":[2924,3619],"class_list":["post-869341","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banking","tag-reserve-bank","tag-sarb"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/869341","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=869341"}],"version-history":[{"count":5,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/869341\/revisions"}],"predecessor-version":[{"id":869408,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/869341\/revisions\/869408"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/869366"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=869341"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=869341"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=869341"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}