Pretoria: The South African Reserve Bank's Monetary Policy Committee has decided to maintain the repo rate at 6.75%, as announced by Reserve Bank Governor Lesetja Kganyago. This decision also keeps the prime lending rate steady at 10.25%.
According to South African Government News Agency, the decision was made with a divided committee, where two members favored a reduction of 25 basis points, while four members preferred maintaining the current rate. The Quarterly Projection Model anticipates gradual rate cuts as inflation decreases, though it currently interprets the policy stance as moderately restrictive, with rates expected to reach neutral levels by 2027. Kganyago emphasized that future decisions will be made on a meeting-by-meeting basis with close attention to economic outlook and risk factors.
Kganyago highlighted that South Africa's economic growth appears more stable, with expansion observed over four consecutive quarters. Preliminary data suggests further growth in the most recent quarter, marking the longest unbroken growth phase since 2018, driven primarily by household consumption, which increased by over 3% last year. However, investment showed weakness, contracting in the first half of 2025, but rebounded in the third quarter. The Reserve Bank hopes for sustained investment recovery to achieve structurally higher economic growth with forecasts moving somewhat higher, nearing 2% over the medium term.
Inflation, which rose to 3.6% in December 2025, is anticipated to slow. The near-term inflation forecast has decreased due to a stronger rand and lower oil price assumptions. However, the Reserve Bank is monitoring food inflation, particularly meat prices, affected by a foot and mouth disease outbreak, and electricity prices, which may rise significantly due to NERSA's price correction.
Kganyago described the past year as pivotal for the South African economy, marked by domestic reforms and a new inflation target, resulting in lower borrowing costs and steadier growth. He stressed the importance of sustaining this progress, with monetary policy focused on stabilizing inflation at 3% in the coming years. Additional economic improvements are expected from managing public debt prudently, lowering administered price inflation, and continuing structural reforms to boost growth potential.