SARB keeps rates on hold and hints at inflation pressures enduring

South African Reserve Bank governor Lesetja Kganyago announced the repo rate will remain at 8.25% at a monetary policy committee (MPC) briefing in Pretoria on Wednesday. The decision was unanimous and the policy stance remained restrictive, the governor said.

Core inflation rose to 5% due to an acceleration in services led by the medical aid component. He said this and high services inflation suggest South Africa is joining the global trend of services, rather than goods, becoming a major source of inflation.

The economy expanded by 0.1% with supply-side problems such as load-shedding, which was worse than in previous years, and port and rail problems as binding constraints on output.

“Overall we see growth at 1.2% this year, improving to 1.6% by 2026. These projections are better than the 2023 outcome but below longer-run averages, which are about 2%,” he said.

The meeting comes a week after Stats SA announced consumer price inflation had climbed from 5.3% in January to 5.6% in February.

Kganyago said since the start of the year, South Africa has seen persistent global inflation pressures with headline inflation rates lower than a year ago but underlying inflation still elevated.

“Goods inflation has declined significantly as supply shocks wear off, but there is evidence of stronger inflation in services across a range of economies. Meanwhile, unemployment rates remain low — especially in the US.”

Kganyago said while the MPC still saw headline inflation heading back to 4.5%, extra inflation pressure meant it now reaches the target midpoint only at the end of 2025, later than previously expected.

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