FX.co ★ South Africa Unexpectedly Keeps Rates Steady

The South African Reserve Bank left its benchmark repo rate unchanged at 7% on July 23, defying most analysts’ expectations of a 25-basis-point hike. Policymakers opted to prioritize a fragile economic recovery while acknowledging ongoing inflation risks.

The Monetary Policy Committee voted 4–2 to hold rates, pointing to a slightly improved inflation outlook and softer growth prospects. The Bank reiterated its commitment to guiding inflation toward its 3% target over time.

Governor Lesetja Kganyago cautioned that renewed conflict in the Middle East—already pushing up oil and fertilizer prices—could still prompt further tightening if higher fuel costs feed through into food prices and core inflation.

Annual inflation in South Africa quickened to 5% in June. However, the central bank now projects inflation to average 4% in 2026, an improvement from its previous forecast of 4.4%. The SARB also upgraded its 2026 growth forecast to 1.4% from 1.2%, while warning that economic momentum may lose steam in the coming quarters.