South African Reserve Bank holds repo rate at 7.00% in 4–2 vote as it targets 3% inflation

The South African Reserve Bank's Monetary Policy Committee kept the repo rate unchanged at 7.00% on 18 September 2025. The decision was not unanimous: four members voted to hold and two preferred a 25-basis-point cut.

Governor Lesetja Kganyago said the committee wanted to observe the impact of the 125 basis points of cuts delivered since September 2024 before moving again. Commercial banks' prime lending rate remains at 10.5%.

INFLATION OUTLOOK

The SARB said core inflation was around 3% and that inflation expectations had moderated further, although headline inflation was expected to rise in the coming months to peak at around 4%. It forecast headline inflation to average 3.4% in 2025 and 3.6% in 2026 before reverting to 3% in 2027, and assessed the risks to the outlook as balanced.

Kganyago highlighted administered prices. “Our forecast now incorporates higher electricity price inflation of nearly 8% rather than 6%,” he said, adding that this was “a reminder of the serious dysfunction in administered prices, which undermines purchasing power and weakens growth.”

On the global backdrop, he noted that policy rates had been cut in the United States and the United Kingdom since the previous meeting and that the dollar had weakened, conditions he described as supportive for emerging markets. The Bank raised its 2025 growth forecast from 0.9% to 1.2% after stronger-than-expected second-quarter GDP data.

TARGET REFORM

The decision came as the SARB and National Treasury work towards a 3% inflation target in place of the current 3%–6% range. Technical work is being finalised by the Macroeconomic Standing Committee, and the Finance Minister is to make a formal announcement once agreement is reached. “We look forward to agreeing a new target as soon as is practical, to better anchor inflation expectations,” Kganyago said. The MPC noted that stabilising inflation at 3% rather than 4.5% implies a lower long-term policy rate, but said cuts would remain gradual and data dependent.