South African policy rate maintained at 6.75 percent amid global uncertainty

The Monetary Policy Committee (MPC) unanimously decided to keep the policy rate at 6.75 percent.

This decision reflects a cautious approach in response to the recent Middle East conflict, which has driven commodity prices higher and introduced significant global uncertainty.

South Africa's inflation rate stood at 3.0 percent in February, aligning precisely with the target.

However, the SARB anticipates headline inflation to accelerate to around 4 percent in the near term, primarily due to rising energy prices, with fuel inflation projected to exceed 18 percent in the second quarter.

The central bank's baseline forecast still expects inflation to return to the 3 percent target by late next year, assuming a gradual unwinding of the current supply shock.

South Africa's economy grew by 1.1 percent in 2025, an improvement from previous years but still below long-run averages.

While green shoots like rising confidence and stronger investment are noted, the ongoing conflict poses downside risks to the growth recovery.

The SARB's growth projections remain largely unchanged, expecting around 2 percent growth over the next few years.

The Committee emphasized its strategy for supply shocks, focusing on looking through first-round effects while remaining vigilant for second-round effects that could trigger broader price increases.

This approach aims to ensure that price responses to supply shocks are transitory, not persistent, relying on forecasts and indicators like wages and inflation expectations to assess broader inflationary pressures.