The Reserve Bank has held the repo rate at 6.75%, citing, inter alia, “what appears to be a rupture in the global political order,” South Africa’s food inflation — affected by the foot-and-mouth disease outbreak — as well as a stronger rand and a lower oil price assumption. “There are also new threats to central bank independence,” Bank Governor Lesetja Kganyago said, adding that 2026 “has begun with a new round of shocks”. Kganyago announced the decision on Thursday, following the monetary policy committee’s (MPC) first meeting of 2026.
Two members favoured a cut, while four preferred a hold. “Markets are jittery, and precious metals like gold have received safe-haven flows. There are also ongoing risks of an AI bubble,” Kganyago said.
The decision marks the second MPC meeting since the 3% inflation target was formally adopted. It also comes ahead of the national budget in February, where markets will be watching to see if the government’s spending plans are consistent with that lower inflation goal. While consumer inflation edged up slightly in December, closing the year at 3.6% (up from 3.5% in November), it brought the annual average for 2025 to 3.2% —the lowest since 2004and well within the Bank’s official 3% target, with a tolerance band of one percentage point on either side.
Read Full Article on The Sowetan
[paywall]
The Reserve Bank now expects inflation to have peaked at December’s 3.6% and to slow from here. It has also lowered its 2026 inflation forecast from 3.5% to 3.3%, citing a stronger rand and lower oil price assumption. There are also ongoing risks of an AI bubble.” The rand has rallied more than 8% against the US dollar since the November MPC meeting, outperforming many emerging-market peers and coming in stronger than the Bank had assumed in its previous forecasts.
The stronger rand and lower oil prices have supported expectations that inflation will continue to moderate in the months ahead. “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,” Kgyanyago said. “We are also concerned about electricity prices, given that Nersa’s price correction may rise from R54bn to R76bn.” The Bank mentioned the recentrecord-low inflation expectations.
“We look forward to expectations declining further, as South Africans experience ongoing lower inflation and learn more about the new target. In turn, lower expectations will be important for getting inflation to settle at 3%.” The MPC’s announcement follows the US Federal Reserve’s decision on Wednesday night to pause its rate-cutting cycle. While the MPC does not mirror the Fed’s actions, it monitors US policy closely, as shifts in global interest rate differentials can influence capital flows and, by extension, the rand. The MPC considered two scenarios: one favourable, one adverse.
[/paywall]
