SA Reserve Bank keeps interest rate unchanged

The South African Reserve Bank (Sarb) Governor, Lesetja Kganyago, announced on Thursday that the Monetary Policy Committee (MPC) voted to keep the repurchase rate (repo rate) unchanged at the first meeting of 2026. 

This means the repo rate will remain at 6.75%, translating to the prime lending rate also staying the same at 10.50%.

Ahead of the announcement, it was widely predicted by economists that there would be no change to the rate, with possible rate cuts coming later in the year.

Kganyago said that two members of the MPC favoured a cut, while four prefered a halt. 

Kganyago highlighted the global turbulance that took place during last year, along with the year starting with the global economic pressures. 

"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 have received safe-haven flows. There are also ongoing risks of an AI bubble," the central bank governor said. 

He also said that global imbalances have become very large.

"For instance, China’s trade surplus was over a trillion dollars last year, a new record. Meanwhile, government debt is still growing fast in key economies, for example, with the US fiscal deficit approaching two trillion dollars. These trends are not sustainable," Kganyago added.

Closer to home, the Sarb governor said that growth in South Africa looks steadier.

"The economy has 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," he added. 

"The main growth driver has been household consumption, up by more than 3% last year, compared to an estimated 1.3% for the overall economy. Unfortunately, investment has been weak, contracting during the first half of 2025. However, third-quarter data showed a rebound. We hope this investment recovery will be sustained, allowing the economy to achieve structurally higher growth," Kganyago said.

"More positively, inflation expectations have fallen, with the latest survey showing longer-term expectations at record lows. We look forward to expectations declining further, as South Africans experience ongoing lower inflation and learn more about the new target," he said.

Investec's lead economist, Annabel Bishop, said that the MPC meeting was not expected to see a change in interest rates, coming so soon after November’s -25 basis points cut.

"With the repo rate currently at 6.75%, 325bp above the inflation rate, and with CPI inflation expected to fall below 3.0% y/y in Q2.26, the high real interest rate in South Africa supports further interest rate cuts. Indeed, without an additional -50bp cut this year (expected to be spread over two meetings), the real interest rate will rise further, nearing 4.00% mid-year," Bishop said.

Lead economist at KPMG, Frank Blackmore, said that inflation is calculated on a month-to-month basis.

"We compare January 2026 to January 2025 and if there has been a small change in terms of inflation last year it may result with the same month and month change to a slightly higher level of inflation. We therefore expect inflation to come in around 3.7% in 2026. This will not deter the Reserve Bank from reducing interest rates further throughout 2026 because the expectations for inflation are converging on the new target of 3% and in our prediction, we can therefore expect an additional 50 basis points of cuts through 2026," he said. 

BUSINESS REPORT