The South African Reserve Bank (SARB) kept its benchmark repo (interest) rate steady at 7% on Thursday, in a split decision that highlighted lingering inflation concerns despite easing price pressures.
The move keeps South Africa’s prime lending rate for commercial banks unchanged at 10.5%. The Monetary Policy Committee (MPC)’s pause comes amid heightened global uncertainty and persistent domestic vulnerabilities, even as 30% US tariffs on South African goods took effect in August.
This contrasts with the US Federal Reserve, which on Wednesday cut its key rate by 25 basis points for the first time this year.
Governor Lesetja Kganyago said the decision, taken by a 4–2 vote, reflected the MPC’s assessment that inflation risks remain elevated even as headline inflation cooled to 3.3% in August from 3.5% in July. The bank still expects price growth to average around 4% in the near term.
“The forecast has rates easing gradually as inflation returns to the bottom end of the 3–6% target range,” Kganyago said, noting that the MPC is committed to anchoring inflation closer to 3% over the long run. “Stabilising inflation at 3%, rather than 4.5%, implies a lower longer-term level for the policy rate.”
Domestic environment
The bank revised its economic growth forecast for 2025 upward to 1.2% from 0.9%, citing second-quarter growth of 0.8% that surprised on the upside.
Kganyago, however, warned that domestic risks persist. Higher electricity tariffs will weigh on consumers and businesses after the National Energy Regulator of South Africa (Nersa) admitted last week to a R54 billion ($3.1 million) pricing error. The error, first spotted in January but only disclosed in September, will result in higher charges for households and firms.
“This is a reminder of the serious dysfunction in administered prices, which undermines purchasing power and weakens growth,” the governor said. He added that reforms, rather than higher inflation, were needed to address inefficiencies in the power sector.
Global conditions are providing some relief, with resilient financial markets supporting emerging economies like South Africa. But the SARB noted that uncertainty about inflation expectations and external risks justified a cautious stance.
On its new inflation target, the governor confirmed that discussions with the National Treasury are ongoing to finalise reforms to the benchmark, with the SARB pushing for a 3% anchor rather than the current 3–6% range.
Note: Local currency figures were converted to US dollars using the exchange rate of R17.3/$1 as of September 19, 2025.
