South Africa Interest Rate

May sees SARB hike rates for first time in three years

South African Reserve Bank raises rates in split decision: On 28 May, the monetary policy committee of the South African Reserve Bank (SARB) raised its policy rate by 25 basis points to 7.00%—the first hike since May 2023—following two consecutive holds. Markets had already priced in the move, yet the narrow 4-2 vote revealed the committee was torn between tightening and holding.

Inflation drives hike: The SARB's decision to hike was driven primarily by a sharp rise in inflation and upside risks to consumer prices; the SARB warned that overlapping shocks could trigger second-round effects. Inflation climbed to 4.0% in April from 3.1% in March—the fastest pace since August 2024—pushing it to the upper end of the SARB’s 2.0–4.0% target range. The uptick was largely attributable to the Iran energy price shock, which fed through into higher commodity costs domestically. With South Africa heavily dependent on energy imports, policymakers were also wary that a weaker rand could further stoke imported inflation.

Middle East conflict weighs on outlook: The SARB warned that further hikes could follow should the Iran war drag on, fanning inflation. Our Consensus is for the SARB to stand pat through year-end. However, some panelists have penciled in further hikes, while others forecast the resumption of monetary easing by year-end in line with the SARB’s forecast, which still sees its repo rate ending the year just below 6.50%. The SARB will reconvene on 23 July.

Panelist insight: On the 2026 outlook, EIU analysts commented: “We now forecast that the SARB will maintain its policy rate at 7% for the bulk of 2026, before ebbing inflationary pressures and the restarting of monetary easing in the US presage a policy rate cut of 25 basis points in the final quarter of the year.”

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects South African interest rate projections for the next ten years from a panel of 15 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for South African interest rate.

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