South Africa Interest Rate

South African Reserve Bank holds fire in July

SARB unexpectedly stays put after hiking at its previous meeting: At its meeting on 23 July, the South African Reserve Bank (SARB) kept its repo rate at 7.00%, following a 25 basis point hike in late May. The vote was 4–2, with two Monetary Policy Committee members voting for another 25 basis point hike. The hold contrasted with the expectations of market analysts, among whom a 25 basis point hike was the dominant view, with a minority penciling in a hold.

Slowing GDP growth and rising inflation prompt Bank to hold: The Central Bank decided not to hike rates further because it anticipates slower GDP growth through Q2 and Q3 following a stronger-than-expected expansion in Q1. Falling consumer and business sentiment, municipal dysfunction, higher fuel prices weighing on household budgets and uncertainty on investment drove the decision. Meanwhile, a cut was not on the table due to inflation rising further above the 3% target in recent months amid high fuel costs. Moreover, the Bank noted that inflation expectations have risen, especially for the near term, adding that the policy stance remains appropriate for now to restrain upside inflationary pressures.

SARB forecasts stable rates through year-end, while our panel is split: The Central Bank forecasts the repo rate to remain broadly stable through year-end and ease thereafter as inflation falls to its target. Still, the SARB noted that decisions will continue to be made on a meeting-by-meeting basis, with careful attention to the economic outlook, data outcomes and the balance of risks to the forecast. Our panel is almost evenly split between a 25 basis point hike and a hold in the remainder of 2026. The SARB will reconvene on 23 September.

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