South Africa: SARB cuts rates in November and adopts new inflation target
SARB lowers interest rates and its inflation target: At its meeting on 20 November, the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) resumed its loosening cycle and reduced its repo rate by 25 basis points to 6.75%. The cut followed two same-sized reductions in May and July, before a pause in September. The decision was unanimous, had been priced in by markets, and followed the formal adoption of a new, lower inflation target of 3.0% on 12 November.
Improved inflation outlook drives cut: The decision to reduce rates was driven by an improvement in the inflation outlook. Despite accelerating in October, inflation slightly undershot the Bank’s expectations. This, coupled with a recently stronger rand and expectations of lower oil prices ahead, led to the inflation outlook to improve: The SARB cut its 2026 inflation forecast to 3.5% from 3.6%, and it kept its 2027 projection at 3.1%—just a sliver above the new target.
Regarding economic activity, the Bank raised its 2025 GDP growth forecast by 0.1 percentage points to 1.3%, while it kept its projections for 2026 and 2027 at 1.4% and 1.9%, respectively.
Further rate reductions in store in 2026: The Central Bank provided no explicit forward guidance on the future direction of interest rates. That said, the Bank forecasts its repo rate to end 2026 just below 6.25%, which largely mirrors our Consensus for around 50 basis points of cuts next year. The SARB will reconvene on 29 January 2026.