SARB holds policy rate at 6.75 percent amid balanced inflation risks
The South African Reserve Bank's Monetary Policy Committee (MPC) kept the policy rate unchanged at 6.75 percent at its January 2026 meeting. Two members favoured a cut of 25 basis points, while four preferred a hold.
Inflation's expected peak
The MPC's decision to hold rates comes as inflation is expected to slow after peaking at 3.6 percent in December 2025. The average inflation for 2025 was 3.2 percent, close to the SARB's 3 percent objective.
Near-term inflation forecasts have fallen, supported by a stronger rand and lower oil prices.
However, the Committee remains vigilant regarding food inflation, particularly meat prices affected by foot and mouth disease, and potential increases in electricity prices.
Positively, longer-term inflation expectations have reached record lows, contributing to the assessment that risks to the inflation outlook are balanced.
Growth steadies amid global headwinds
The MPC's decision was made against a backdrop of elevated global uncertainty, including geopolitical tensions.
Despite these challenges, global growth remains resilient, supported by AI investments and fiscal stimulus.
Domestically, South Africa's economy has expanded for four consecutive quarters, driven primarily by household consumption.
While investment was weak in early 2025, a third-quarter rebound offers hope for higher growth, with forecasts approaching 2 percent over the medium term.
The Quarterly Projection Model (QPM) projects gradual rate cuts as inflation subsides, with policy rates reaching neutral levels by 2027.
Patience for the 3% target
The SARB's cautious hold, despite a split vote, underscores its commitment to anchoring inflation at the new 3 percent target.
While the QPM projects future cuts, the MPC's emphasis on data-dependence highlights the ongoing uncertainty in both global and domestic factors.
This approach prioritizes long-term price stability over immediate easing, aiming to solidify lower inflation as the new normal for South Africa.