The SA Reserve Bank’s first interest rate decision for 2026 came in the midst of rand strength and moderate inflation.
Andrii Yalanskyi/Getty Images
- The SA Reserve Bank has left the interest rate unchanged in the first 2026 meeting of the monetary policy committee.
- However, the bank’s model predicts two cuts in 2026 and another one in 2027.
- While inflation might cool, there are risks to food prices because of ongoing foot-and-mouth disease.
- For more financial news, visit News24 Business.
The SA Reserve Bank has kept the interest rate unchanged, but two members of the monetary policy committee (MPC) favoured a cut.
The 4-2 split implies it was not an easy decision, echoing a 13-11 split in favour of an unchanged rate by economists Bloomberg surveyed prior to the announcement.
The split decision increases the odds of a cut in March, and the Reserve Bank’s quarterly projection model still factors in two cuts for 2026. Only one further cut is then predicted in 2027, possibly ending the current rate-cutting cycle.
The Reserve Bank’s decision means banks will leave their prime interest rate at 10.25%.
Governor Lesetja Kganyago said in the MPC’s opinion inflation had reached its medium-term peak in December, at 3.6%, and will slow going forward.
“Indeed, our near-term inflation forecast has fallen, with the rand stronger and a lower oil price assumption. We are, however, keeping an eye on food inflation, especially meat prices, which are being affected by a serious outbreak of foot-and-mouth disease. We are also concerned about electricity prices, given that Nersa’s price correction may rise from R54 billion to R76 billion.”
The last is a reference to a controversial calculation error by the National Energy Regulator of SA that might lead to higher tariff increases for the next two years.
The central bank lowered its inflation expectation for 2026 to 3.3% (from the November expectation of 3.5%). For 2027 the expectation was increased to 3.2% (from 3.1%). The expectation for 2028 is unchanged at 3%.
Kgaynago celebrated “steadier” growth, with the fifth quarter of growth – the longest unbroken growth phase since 2018 – expected in the final quarter of 2025.
Growth has been driven by household spending, while investment has been weak.
Kganyago flagged that markets are currently “jittery”, and repeated his view or a bubble in artificial intelligence stock building up.
The rate decision is the second since Finance Minister Enoch Godongwana formally endorsed the 3% inflation target in November. In November, the Reserve Bank cut the interest rate, its sixth cut since September 2024, bringing the total cuts to 1.5 percentage points.
The change in the inflation expectation for 2027 has been corrected.
