- Decision
- Lower
- Rate change
- 25 bps
- repurchase rate
- 6.75%
The South African Reserve Bank’s Monetary Policy Committee cut the repo rate by 25 bp to 6.75 % with effect from 21 November, unanimously judging that softer-than-expected inflation, a firmer rand and lower oil prices allow a modest shift toward a less-restrictive stance while keeping inflation on track for the new 3 % target (±1 pp). After keeping the rate at 7 % in September, when it noted a cumulative 125 bp of easing since September 2024, the MPC has now extended the gradual cutting cycle. The committee provided no changes to operating procedures beyond the repo adjustment. October headline CPI quickened to 3.6 % from an average 3 % in H1, but the bank trimmed its 2025-26 inflation projections and sees balanced risks; growth is forecast at 1.3 % in 2025, edging toward 2 % over the horizon as employment rises and a tentative investment rebound follows earlier weakness. A stronger rand is supporting lower core-goods inflation, and terms of trade remain favourable, although the SARB warns that any renewed dollar strength or higher administered prices could slow easing. Globally, resilient activity is tempered by divergent inflation trends and concerns that an AI-led equity bubble and cheap credit could trigger a correction harming emerging markets. The Quarterly Projection Model still points to further, gradual rate cuts, but policymakers stressed decisions will remain data-dependent and taken meeting by meeting, while underscoring the need for continued structural reforms to entrench the lower 3 % inflation regime.
Rate evolution
Over the period, the South African Reserve Bank lowered the policy rate by 75 basis points from 7.50% to 6.75%, with two early cuts, a September pause, one further reduction in November and then holds in January and March as easing became more cautious, before raising it by 25 basis points to 7% in May 2026, holding in July and raising it by another 25 basis points to 7.25% in September. The initial easing reflected inflation below 3%, core inflation near the bottom of the target range, a stronger rand, lower oil prices, softer inflation expectations and weak domestic growth, even as the Monetary Policy Committee warned that trade tensions and currency weakness could produce a stagflationary shock, while increasingly framing decisions during 2025 around securing inflation at 3%, first by aiming for the bottom of the 3-6% range and then, from November, under a formal 3% target with a tolerance band of plus or minus 1 percentage point.
In January and March it kept the rate at 6.75% as inflation stayed near target and expectations continued to fall, but the Middle East shock shifted inflation risks to the upside, pushed back projected cuts and prompted the bank to stress second-round effects, downside risks to growth and meeting-by-meeting decisions. By May, with hopes for a quick end to the crisis fading and South Africa’s growth forecasts lowered, inflation had risen to 4% in April from 3.1% mostly because of higher energy costs, services inflation accelerated to 4.6%, and the forecast showed headline inflation averaging 4.4% in 2026 and 3.7% in 2027 before returning to the 3% target in 2028, leading the committee to raise the policy rate to 7% effective from 29 May 2026. In July it held the policy rate at 7%, judging that the previous increase had made the stance somewhat restrictive and appropriate for the time even as the Middle East crisis entered a more volatile phase, oil prices rebounded, inflation remained above target, underlying pressures strengthened and downside risks to growth persisted.
In September, the committee unanimously raised the policy rate by 25 basis points to 7.25%, effective from 25 September 2026, as escalating conflicts intensified a persistent global supply shock, fuel prices rose again, global rates moved higher, services inflation remained elevated and longer-run expectations stayed around 4%, with headline inflation likely to be above 5% later in 2026 and early in 2027 and inflation risks to the upside despite a 0.2% second-quarter contraction and downside growth risks.