Sarb keeps repo rate steady to anchor inflation at ‘new normal’ of 3% target

The Monetary Policy Committee (MPC) of the South African Reserve Bank (Sarb) kept the repo rate unchanged at 6.75% on Thursday, 29 January, despite a significant rand rally and gold surging past $5,100 an ounce.

The decision keeps the prime lending rate at 10.25%. While headline inflation rose to 3.6% in December, Sarb Governor Lesetja Kganyago noted that the 2025 average of 3.2% was close to their 3% objective.

Read more: Prime interest rate may soon be phased out, says SA Reserve Bank governor

“Last year was marked by extreme global uncertainty, and 2026 has begun with a new round of shocks,” said Kganyago. “Two members favoured a cut of 25 basis points, while four preferred a hold. When you have a split decision, you should also celebrate because that means that there is no groupthink in the MPC.”

This move reflects a central bank determined to anchor expectations at its new 3% target, even as the economy enters its longest unbroken growth phase since 2018.

The global spaghetti bowl

The rand’s recent performance, hitting below the R16/$ mark, was a central theme of the briefing. Kganyago attributed this not just to dollar weakness, but to “pull factors” like South Africa’s mineral wealth.

“With people looking to diversify out of the weakening dollar, they had been buying gold. Gold didn’t just rise on its own. It pulled other metal prices, silver, platinum and so forth,” the governor said, adding that the adoption of the new inflation target had itself bolstered the currency.

Read more: Gold surges past $5,000 as strengthening rand boosts rate cut hopes

FNB chief economist Mamello Matikinca-Ngwenya noted that South Africa’s removal from the Financial Action Task Force’s grey list and the European Union’s high-risk list provided an “important confidence boost” just as commodity demand improved.

She pointed out that rising gold, silver, and nickel prices were “strengthening the country’s financial position and export earnings”, which should help unlock increased employment in the mining sector.

Kganyago remained wary of global fragilities, including the “ongoing risks of an Artificial Intelligence (AI) bubble” and unsustainable US fiscal deficits.

He was vocal about the “spaghetti bowl” of global trade agreements forming outside of multilateral systems and highlighted the 30% tariff recently slapped on South African exports to the US as a key domestic risk.

How this affects you
💰 Your monthly bond and car repayments will stay the same for at least two more months;
💰 The pause gives you a chance to review your finances ahead of the February national Budget with no immediate interest rate shocks;
💰 A stronger rand and lower oil prices will help keep costs down at the pump and on retail shelves despite the rate hold;
💰 Rising metal prices and the removal of South Africa from the grey list support better stability in the mining and industrial sectors and;
💰 The Sarb’s focus on a 3% target means your money should maintain its purchasing power more effectively over time.

Mixed signals for property

The decision to keep rates on hold means the cost of debt remains unchanged for at least another two months. Samuel Seeff, the chairperson of the Seeff Property Group, called the move a “massive, missed opportunity”, noting that interest rates remained “stubbornly above pre-pandemic levels” that continued to “hinder economic growth.”

Jonathan Kohler, CEO of Landsdowne Properties, noted that pauses were often part of the easing process and can keep the market realistic. While renters might wait longer for cheaper loans, Kohler suggested a pause forces buyers and sellers to focus on price and value, rather than betting on what rates might do next.

“The decision to hold the repo rate steady provides welcome certainty for homeowners and prospective buyers, reinforcing a period of stability in the residential property market. For prospective buyers, a period of rate stability may present an opportunity to enter the market with greater confidence,” said Toni Anderson, head of home services at Standard Bank.

In pursuit of a ‘new normal’

Kganyago highlighted that while goods inflation was performing well, the last mile of the inflation fight was proving more difficult.

“With the rand relatively stronger, fuel prices lower and inflation pressures limited, our projections suggest a strong likelihood of further rate cuts later in the year,” said FNB CEO Harry Kellan. “This should help support business confidence and provide welcome relief for consumers as the year progresses.”

Read more: Sarb cuts rates by 25 basis points, Kganyago says new inflation target means ‘we want 3%’

Kganyago explained that while a stronger rand had helped keep goods inflation at 3% and core goods at 1.2%, services inflation remained sticky at over 4%. He emphasised that for low inflation to become South Africa’s “new normal”, it was essential for services inflation to move closer to the bank’s 3% target.

Consumer pressure remains

The reality on the ground remains difficult for many. “While it’s understandable that the Sarb would ultimately weigh both domestic inflation conditions and global risks before taking the next step in the rate-cutting cycle, the state of the consumer should be the utmost priority for government right now,” said Debt Rescue’s CEO, Neil Roets.

He pointed out that households were burdened by mounting debt and a rising cost of living that outpaces income growth.

Read more: SA consumer inflation averages 3.2% in 2025, well inside Sarb’s new target range

Kganyago also warned that while inflation for 2025 averaged 3.2%, the bank remained vigilant regarding meat prices due to foot and mouth disease and potential electricity price corrections.

The MPC’s announcement comes as the government finalises its annual Budget, which will be presented in February. This period of unchanged interest rates allows households to review their spending and debt obligations with more certainty before any further shifts in the economic cycle. DM