South African Reserve Bank Governor Lesetja Kganyago. (Photo: Leila Dougan) 
The South African Reserve Bank’s (Sarb) Monetary Policy Committee (MPC) voted to keep the repo rate unchanged at 7% after its meeting on Thursday, 18 September.
The decision was close, with four members backing a hold and two pushing for a 25-basis-point cut.
Sarb governor Lesetja Kganyago said the pause is deliberate – that the Bank wants to observe the impact of the 125 basis points in cuts since September last year before moving again.
Fragility persists
The Bank has nudged up its 2025 growth forecast from 0.9% to 1.2% after GDP data surprised on the upside last week.
Kganyago cautioned that stronger growth cannot be taken for granted. “Reaching a healthy growth rate will require much higher investment levels than we are achieving now.”
Read more: SA economy expands by a better-than-expected 0.8% in Q2, with mining leading the way
Electricity prices remained one of the central obstacles. “Our forecast now incorporates higher electricity price inflation of nearly 8% rather than 6%,” the governor said.
Read more: Consumers to bear the brunt as Nersa bungles push up Eskom tariffs
“This is a reminder of the serious dysfunction in administered prices, which undermines purchasing power and weakens growth. The solution to this crisis is not a higher level of inflation, but rather sector-specific reforms to improve efficiency.”
The new policy anchor
What makes this meeting more significant than a routine pause is Sarb’s stance on inflation. The Bank and National Treasury are converging on a new de facto target of 3%, the bottom end of the 3%-6% official range.
By holding steady now, Sarb is attempting to entrench credibility around this lower anchor. “There are gains to be had from clear and credible communication. In this regard, it is desirable to finalise target reform. We look forward to agreeing a new target as soon as is practical to better anchor inflation expectations,” the governor said.
Read more: The stars are lining up for a 3% inflation target — and lower interest rates
Lower inflation expectations, if secured, pave the way for sustainably lower interest rates in the future. If expectations remain backward-looking, the governor acknowledged, convergence to 3% will take longer and rate cuts will be fewer.
How this affects you
- Tando Ngibe, senior manager at Budget Insurance, details how, in this environment of uncertainty, proactive steps can make a difference:
- Review debt: Compare rates on existing loans and consider consolidation to cut costs;
- Emergency fund: Save three to six months of expenses in a reliable account;
- Budget smartly: Track spending, avoid impulse buys and channel saving into debt or tax-free investments; and
- Get advice: A qualified planner can help build a strategy that fits your needs.
A balanced decision or case for a cut?
Dr Elna Moolman, head of South Africa macroeconomic research at the Standard Bank Group, said the Reserve Bank’s own models leave room for future relief if inflation remains benign.
“Today’s decision was always going to be finely balanced, and in the end the Sarb decided to opt for a cautious approach. We always saw a very narrow window for easing in late 2025,” said Razia Khan, chief Africa economist at Standard Chartered Bank. “There’s a risk that the next cut only comes when inflation resumes its year-on-year downtrend, from Q3-2026.”
Read more: Game Changer? August CPI slowdown surprise raises new hopes for rate cut on Thursday
Some economists and business leaders argue that the MPC passed up a chance to provide much-needed stimulus.
Tertia Jacobs, Treasury economist and fixed income analyst at Investec, said monetary policy is still “relatively restrictive, with the current real repo rate at 3.7%”. She believed a 25-basis-point cut would have been justified given the benign inflation profile.
Property sector heavyweight Samuel Seeff called the decision to leave the rate unchanged a “missed opportunity” for the economy and property market, pointing out that with low inflation and a stable rand, there was “adequate reason to provide at least a 25-basis-point cut”.
Banks urge patience, consumers get breathing room
Commercial banks struck a more measured note. First National Bank said it would maintain its prime lending rate at 10.5% in line with Sarb’s decision.
FNB chief economist Mamello Matikinca-Ngwenya said: “While we have seen a notable improvement in consumer confidence, business confidence has not followed the same trend. Both remain in negative territory, suggesting that the economy still faces a low-growth environment. Interest rates are only one factor influencing confidence, and the Sarb’s decision to keep rates unchanged places greater emphasis on other priorities such as boosting household incomes and creating employment opportunities.”
Read more: SA consumer inflation slows to 4.4% year on year in August, sealing case for domestic rate cut
For consumers, the practical impact is steady borrowing costs for now. Ngibe said: “For everyday South Africans, this means the status quo on borrowing costs remains intact. The prime lending rate charged by commercial banks will stay at 10.5%, keeping monthly repayments on home loans, car finance and credit cards steady for now.” DM