The South African Reserve Bank (SARB) announced that it is maintaining its benchmark interest rate at 6.75%. In the Monetary Policy Committee (MPC) decision, four members voted to keep the rate unchanged while two members favored a 25 basis point cut.
The bank cited a balanced inflation outlook in explaining the hold decision. Inflation reached 3.6% in December, which the SARB expects to have been the peak, and the bank projects that inflation will slow from current levels toward its 3% target.
Governor Lesetja Kganyago underlined the broader economic context in the MPC statement, noting that the South African economy has expanded for four consecutive quarters - the longest continuous growth stretch since 2018. The SARB projects economic growth of 1.3% for 2025 and expects household consumption to increase by more than 3% during that year.
"Our forecasts continue to show growth moving somewhat higher, approaching 2% over the medium term," Kganyago said in the MPC announcement.
The bank's Quarterly Projection Model continues to indicate a path of gradual rate reductions as inflation subsides, with policy rates anticipated to reach neutral levels during 2027. The SARB described its current policy stance as "moderately restrictive." The central bank also reported that inflation expectations have fallen to record lows according to the latest survey, a development it interprets as progress toward its 3% objective.
Looking at the composition of inflation, goods inflation is currently at 3%, while core goods inflation stands at 1.2%. Services inflation remains higher, at above 4%, reflecting divergent pressures across categories.
The SARB highlighted several areas it is actively monitoring for upside inflation risk. Food prices - in particular meat prices affected by foot and mouth disease - remain a concern. Electricity prices are also a key risk, as a potential adjustment by the energy regulator NERSA could raise the price correction from R54 billion to R76 billion.
On external factors, the bank noted a range of global uncertainties, including geopolitical tensions, risks related to an AI bubble, and large global imbalances. Despite these concerns, the SARB observed that financing conditions for emerging markets remain benign and that global growth is holding up.
Finally, the bank reiterated that policy decisions will continue to be made on a meeting-by-meeting basis, with close attention paid to incoming economic data and the evolving balance of risks to its forecast.