South Africa: South African Reserve Bank holds fire in March as expected
SARB extends loosening cycle pause: At its meeting on 26 March, the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) kept its repo rate at 6.75%. The hold was unanimous and had been priced in by markets.
Supply shock from Middle East war calls for caution: The hold was driven by the uncertainty and deterioration of the inflation outlook caused by the Iran war. The conflict has disrupted shipping and pushed up prices for oil, gas and fertilizer, in turn leading the SARB to hike its headline and core inflation forecasts for both 2026 and 2027. The SARB expects inflation to rise in the near term on higher fuel inflation, and deems inflation risks to be skewed to the upside.
Regarding economic growth, the Bank kept its domestic GDP growth projections unchanged, although it noted the war could lead to downgrades ahead.
Fewer cuts on the table for this year: The SARB provided no explicit forward guidance. However, the Bank’s forecasts for its end-2026 repo rate level were more hawkish than at its last meeting in January: The SARB now sees its repo rate ending the year just below 6.50%—in January it forecasted the repo rate to end 2026 at just above 6.25%—largely in line with our Consensus. The SARB will reconvene on 28 May.