As expected, South African Reserve Bank (SARB) Governor Lesetja Kganyago announced a 25 basis-point increase in the benchmark repo rate on Wednesday.
This represents the second increase this year, pushing the rate up to 7.25%, with the prime interest rate for commercial banks increasing to 10.75%.
The SARB’s Monetary Policy Committee (MPC) found themselves with limited options due to rising inflationary pressures caused by fluctuating oil prices amidst the ongoing conflict in the Middle East.
Earlier on Wednesday, Stats SA reported that the Consumer Price Inflation (CPI) rate climbed to 4.4% in August, an increase from 4.3% in July.
Read: Inflation rises slightly before rate decision
Although this CPI increase was below expectations, the new figure now sits 140 basis points above the SARB’s revised key inflation target of 3%.
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“We foresee upward risks to inflation,” Kganyago expressed during his September MPC address.
“Considering these factors, the committee unanimously decided to raise the policy rate by 25 basis points to 7.25%, effective from September 25,” Kganyago elaborated.
“A few months prior, it seemed the fuel-price shock was subsiding, but it has now intensified. We are also witnessing a rise in global rates,” he commented.
The MPC decided to raise the policy rate to 7.25%, up from 7% in the last MPC.
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— SA Reserve Bank (@SAReserveBank) September 23, 2026
“We are taking a cautious stance on rate adjustments due to significant uncertainty while remaining dedicated to our price stability mandate. It is crucial that inflation returns to 3% as the current shock subsides, and we acknowledge our role in attaining that goal,” he emphasized.
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Regarding the South African economy, Kganyago noted that the SARB had previously “highlighted downside risks to growth” in their last MPC meeting in July.
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“Data indicates that the economy shrank by 0.2% in the second quarter. However, we still expect a recovery in the latter half of the year, with annual growth forecasted at 1.2%,” he remarked.
“Global disruptions are certainly affecting our economy,” Kganyago warned further.
“We continue to project growth of around 2% over the medium term, depending on global conditions stabilizing and domestic reforms creating a more conducive business environment. Our assessment suggests that growth risks are predominantly tilting toward the downside,” he concluded.
Watch: Lesetja Kganyago discuss leadership, credibility, and the future of central banking
