Reserve Bank governor Lesetja Kganyago. Picture: Gallo Images The Monetary Policy Committee of the Reserve Bank decided at its meeting this week to keep the repo rate unchanged and warned about geopolitical risk to the local economy. Four members of the committee voted to keep the repo rate unchanged at 6.75%, while two favoured a 25 basis points cut.
Lesetja Kganyago, governor of the South African Reserve Bank (Sarb), made the announcement on Thursday afternoon in Pretoria after the meeting of the Monetary Policy Committee (MPC). He pointed out what most of us already know; 2025 was a watershed year for the South African economy. “Despite a volatile global backdrop, there was significant progress on domestic reforms, including a new inflation target.
These efforts have been rewarded with lower borrowing costs, a rapid decline in inflation expectations and steadier growth. It is crucial to sustain this progress. He pointed out that last year was marked by extreme global uncertainty, while 2026 began with a new round of shocks.
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“Geopolitical tensions remain elevated, reflecting what appears to be a rupture in the global political order. There are also new threats to central bank independence. “Markets are jittery and precious metals like gold received safe-haven flows.
There are also ongoing risks of an artificial intelligence (AI) bubble. Furthermore, global imbalances have become very large. “For example, China’s trade surplus was over a trillion dollars last year, a new record.
Meanwhile, government debt is still growing fast in key economies, with the US fiscal deficit, for example, approaching $2 trillion. These trends are not sustainable.” Turning to South Africa, Kganyago said economic growth looks steadier. “The economy expanded for four consecutive quarters and the available data suggest it grew further in the most recent quarter. This would mark the longest unbroken growth phase since 2018.”
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