South African Reserve Bank Holds Main Repo Rate at 7%
The South African Reserve Bank (SARB) has recently maintained its main repo rate at 7%, pausing a cycle of rate cuts as inflation is expected to rise over the coming months. This decision comes after the repo rate was brought down from a 15-year high of 8.25% through a series of reductions starting in September 2024. The SARB’s cautious approach is a response to ongoing inflationary pressures, notably from high meat, vegetable, fuel, and electricity prices.
Inflation Forecasts and Economic Growth
SARB forecasts indicate that headline inflation is expected to peak around 4% in the short term before stabilizing near its newly preferred target of 3% by 2027. Although the official inflation target range of 3%-6% remains, the bank now aims for inflation at the bottom of that range, suggesting a slightly more dovish policy stance. In August, headline inflation stood at 3.3%, having moderated from earlier months.
Turning to economic growth, the SARB has revised its GDP forecast for 2025 upwards, now anticipating a growth rate of 1.2%. This marks the highest quarterly growth rate in two years, up from a previous projection of 0.9%. The revision is attributed to stronger-than-expected second-quarter output, though challenges persist in the export sector due to higher U.S. tariffs on South African goods.
Challenges and Considerations
SARB Governor Lesetja Kganyago has highlighted both global and domestic uncertainties influencing monetary policy. Trade disruptions and persistent supply-side challenges within South Africa present ongoing hurdles. While the strengthening of the rand has helped mitigate some inflationary pressures, food inflation, particularly meat prices, continues to pose a significant risk.
The SARB’s next interest rate decision is scheduled for 20 November 2025, with the subsequent inflation data release expected on 22 October 2025. The central bank continues to underscore the importance of policy reforms and prudent fiscal management to sustain economic growth and maintain price stability.
For more insights into the SARB’s decisions, visit their Monetary Policy Statements for September 2025.
By maintaining the repo rate at 7%, the South African Reserve Bank demonstrates its commitment to carefully navigating through economic uncertainties while aiming to achieve long-term inflation targets. As the economy adapts to external pressures, including those from the international trade environment, the SARB’s decisions will continue to play a pivotal role in shaping South Africa’s economic landscape.