FX.co ★ South Africa Lifts Key Policy Rate as Predicted

The South African Reserve Bank raised its key repo rate by 25 basis points to 7% on May 28, 2026, as widely anticipated, marking its first increase since 2023. Four of the six members of the Monetary Policy Committee voted in favor of the hike, while two preferred to keep rates unchanged.

The committee noted that inflation risks have intensified and cautioned that large, overlapping shocks could generate second-round effects. It said this justified a monetary policy response focused on containing these risks and returning inflation to target.

South Africa’s annual inflation rate rose to 4% in April from 3.1% in March, placing it at the upper end of the central bank’s target range. The bank also revised its inflation projections higher, to 4.4% for 2026 (from 3.7%) and 3.7% for 2027 (from 3.3%).

On the growth front, the central bank cut its economic forecasts, projecting GDP expansion of 2.6% in 2026 (down from 2.9%) and 2.8% in 2027 (down from 3.2%).