The South African Reserve Bank (Sarb) opted not to cut the repo rate on Thursday after giving consumers an early Christmas present in November when it lowered the rate by 25 basis points to 6.75%. This time, the bank was more cautious after the start of 2026 followed the same pattern of geopolitical risks as in 2025. Jee-A van der Linde, senior economist at Oxford Economics Africa, says they expected today’s repo rate decision to be a close call.
“The hawks ultimately prevailed, as the Sarb governor struck a cautious tone, sceptical of global economic trends but more receptive to favourable dynamics at home.” He points out that the Monetary Policy Committee (MPC) statement does not make clear why most members preferred to keep the repo rate unchanged. “We suspect the uncertain global backdrop and the upward trend in services inflation may have been factors. “The US Fed’s decision may also have played a role.
On that score, we anticipate an extended pause. However, unless conditions deteriorate markedly before the next MPC meeting in March, we continue to see scope for further policy easing and forecast a 25 basis points cut in the first quarter of 2026, followed by additional easing later in the year.” Albert Botha, head of fixed income at Ashburton Investments, says it seems the main concern for the MPC and the governor remained heightened geopolitical risk and global macroeconomic uncertainty. “The governor specifically referred to asset price bubbles and uncertainty around artificial intelligence and global imbalances as potential risks.” He says while there may have been scope to begin easing at this meeting, a more cautious approach is understandable given current global conditions.
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“This strategy also preserves policy flexibility and reduces the risk of a policy misstep.” Prof Raymond Parsons, economist at the NWU Business School, says as widely expected the MPC by a 4-2 majority opted to pause its interest rate easing cycle and leave the repo rate unchanged for now. “The MPC majority view provided a plausible case as to why it was considered necessary to further entrenchinflationary expectations amid ongoing global uncertaintybefore making a further cut in borrowing costs for business and consumers. “However, the minority MPC view had a more convincing case for an immediate rate cut of another 25 basis points. The latest data indeed showed that the inflation outlook improved sufficiently to justify earlier policy relief, rather than extending the pause.
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