- Decision
- Maintain
- Rate change
- 0 bps
- repurchase rate
- 6.75%
The Monetary Policy Committee of the South African Reserve Bank on 26 March 2026 kept the policy (repo) rate unchanged at 6.75 %, judging the existing moderately restrictive stance adequate as the Middle-East conflict lifts global energy prices and raises upside risks to inflation while the domestic recovery remains tentative. Following a 25 bp reduction in November 2025, the rate was held in January 2026 and remains on hold now. The bank’s Quarterly Projection Model envisages a longer period without cuts, and the committee reiterated that decisions will be taken meeting by meeting. Headline and core CPI were both 3.0 % in February—exactly at the 3 % target—but headline is forecast to climb toward 4 % in the short term, propelled by fuel inflation of about 18 % in Q2, before easing back to 3 % late next year; 2025 GDP expanded by 1.1 % and is still projected to edge up to roughly 2 % in coming years, though the conflict clouds the outlook. Inflation expectations had been drifting lower before hostilities erupted, but market-based gauges have since firmed. The rand has softened amid global risk aversion and surging oil, gas and fertiliser prices, yet market conditions remain orderly. With major central banks also pausing as they assess the shock’s implications, the SARB affirmed its commitment to the 3 % inflation goal and signalled readiness to raise rates if second-round price pressures emerge, while postponing previously anticipated easing.
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.