South African Reserve Bank Holds Repo Rate at 7%

The South African Reserve Bank unexpectedly maintained its benchmark repo rate at 7% on July 23, 2026, keeping the prime lending rate at 10.5%. The decision followed a 4-2 vote by the Monetary Policy Committee, surprising economists from Reuters and Bloomberg who had predicted a 25-basis-point increase after consumer inflation hit a two-year high of 5% in June.

Governor Lesetja Kganyago stated that the current policy stance is appropriate following a previous rate increase. He attributed the high headline inflation primarily to soaring fuel costs caused by the US-Iran war, conflict in the Middle East, and Red Sea shipping disruptions. While goods prices have remained relatively contained, the bank continues to target long-term inflation stabilization at 3%.

Economic growth in South Africa was stronger than expected in the first quarter due to net exports, but the bank anticipates slower growth through the second and third quarters. This slowdown is linked to weakening business and consumer confidence and municipal dysfunction. The bank forecasts an economic recovery in the second half of 2026 as global shocks fade.