The South African Reserve Bank’s Monetary Policy Committee (MPC) has opted to keep interest rates unchanged, leaving the repo rate at 6.75% and the prime lending rate at 10.25%.

The decision was narrowly split, with four MPC members voting to hold rates and two favouring a 25 basis point cut – highlighting the finely balanced nature of the current economic environment.

Reserve Bank Governor Lesetja Kganyago said that 2025 has been characterised by heightened global uncertainty and persistent market imbalances. Despite this, global asset prices have remained resilient, supported by continued investment in artificial intelligence and fiscal stimulus in major economies.

“Inflation generally slowed last year, and many central banks have had space to adopt more neutral policy settings,” Kganyago noted. “Financing conditions for emerging markets remain benign.”

Domestically, South Africa’s growth outlook has shown signs of improvement, driven largely by household consumption, which rose by more than 3% last year. This contrasts with overall economic growth of approximately 1.3%. Investment, however, remains a concern, having contracted during the first half of 2025.

Kganyago said the SARB expects growth to gradually improve, approaching 2% over the medium term, with some upside risks to the forecast.

Encouragingly, the Reserve Bank believes inflation peaked at 3.6% in December and is expected to continue trending lower. Risks remain, particularly around food inflation linked to the Foot and Mouth Disease outbreak, as well as rising administered prices such as electricity tariffs.

Despite these pressures, inflation expectations have eased and are now seen as broadly balanced. Against this backdrop—combined with global uncertainty and inflation moving closer to the SARB’s 3% target—the MPC elected to maintain its current policy stance.

The decision aligned with market expectations, where analysts viewed the outcome as a close call, skewed slightly in favour of a hold. The SARB’s revised 3% inflation target has been cited as a key reason for caution, with policymakers preferring to assess the impact of previous rate cuts before easing further.

Uncertainty in global politics, particularly around US trade policy, also weighed on the decision. This was reinforced by the US Federal Reserve’s decision to hold interest rates earlier in the week.

Some economists argued that a stronger rand, contained inflation, and improving sentiment towards South Africa presented an opportunity for a rate cut. Nevertheless, the broader consensus remains that the easing cycle is not over.

Looking ahead, forecasts suggest cumulative rate cuts of around 50 basis points in 2026, with a possible further 25 basis point cut in 2027. The SARB’s Quarterly Projection Model continues to indicate gradual easing as inflation subsides, with interest rates reaching neutral levels by 2027.

Commenting on the decision, MJ Dafel, CEO of Property.CoZa South Africa, said the hold provides welcome stability for the property market and consumers.

“While many buyers were hoping for an immediate rate cut, policy certainty is just as important,” said Dafel. “Holding rates steady allows households and investors to plan with confidence, and it reinforces the view that we’re moving closer to a more supportive interest-rate environment. This creates a solid foundation for renewed activity in the residential property market as inflation continues to ease.”

Kganyago reiterated that future decisions will remain data-driven.

“As before, this rate path remains a broad policy guide. Our decisions will continue to be taken on a meeting-by-meeting basis, with careful attention to the outlook, data outcomes, and the balance of risks to the forecast,” he said.

MJ Dafel

Chief Executive Officer