The South African Reserve Bank has published its October Monetary Policy Review, warning that the prolonged energy shock is increasingly feeding into underlying inflation and could become embedded in expectations, wages and broader prices. The Monetary Policy Committee raised the policy rate by a cumulative 50 basis points to 7.25% between April and October 2026, leaving policy moderately restrictive as it seeks to return inflation sustainably to the 3% target. Headline inflation rose from 3.2% in the first quarter to 4.5% in the second and is projected to average 4.4% in 2026. It is expected to remain above 5% until the second quarter of 2027 before returning to target from the fourth quarter. Persistent oil and refinery margin pressures, administered prices, a possible severe El Niño event and fertiliser constraints create upside risks, while the model-implied policy path supports delaying rate cuts. The bank lowered its 2026 growth forecast to 1.2% from 1.4% in April, but expects growth to rise gradually toward 2% by 2029 as structural reforms progress.
South African Reserve Bank flags rising second round inflation risks as policy rate reaches 7.25%
The South African Reserve Bank warned that persistent fuel and food shocks could become embedded in expectations and wages. The policy rate rose by 50 basis points to 7.25% over the review period, while inflation is projected to remain above 5% until the second quarter of 2027. Growth is forecast at 1.2% in 2026.