Everything in the financial world is changing so often and so fast that it is difficult to keep up sometimes, and therefore consumers are not always sure if what happens will benefit them where it matters most: in their pockets. Tomorrow the Monetary Policy Committee (MPV) of the South African Reserve Bank (Sarb) will decide whether to cut the repo rate or keep it as it is, with thankfully no increases expected. The MPC already lowered the repo rate from 8.25% at the start of 2024 to 6.75% by the end of 2025.
What can we expect in the first month of 2026? Patrick Buthelezi, economist at Sanlam Investments, says the MPC is expected to continue easing the repo rate this year, as the Sarb’s Quarterly Projection Model, a broad guide, signalled. However, the timing of the first cut remains uncertain, he says.
“The Sarb is committed to anchoring inflation at 3.0%.Although headline inflation surprised to the downside for much of last year, it ended 2025 at 3.6%. Core inflation also edged higher, reaching 3.3% in December 2025. Buthelezi says this backs the case for caution, with the Sarb maintaining a restrictive policy stance in the near-term to ensure that both headline and core inflation return sustainably to the 3.0% target.
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However, he says, the weakening US dollar, combined with favourable terms of trade, supported the rand, which bodes well for lower imported inflation. “A firmer exchange rate, which the Sarb would incorporate into its projects, would help to improve its inflation outlook. “In addition, although inflation expectations remain above 3.0% and vary across survey participants, they have been drifting lower.
Overall, given the strong arguments for holding the repo rate steady for now as well as cutting, the MPC is likely to be divided on the decision. We expect the MPC to maintain a cautious approach, even as it remains biased toward easing this year.” Albert Botha, head of fixed income at Ashburton Investments, says thinking about potential interest rate cuts by the Sarb is particularly difficult in the current environment where things are consistently in flux.
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