Central Bank holds fire in January

SARB pauses loosening cycle—again: At its meeting on 29 January, the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) paused its loosening cycle, holding its repo rate at 6.75%. The hold followed a 25 basis point cut in November last year and was not unanimous: Two of the six committee members preferred another 25 basis point reduction; markets had largely anticipated the pause.

Inflation expected to slow in the near term: The SARB stated that, while inflation ended 2025 at 3.6%—above the 3.0% target—it attributed this to temporary factors and sees inflation as having peaked and slowing ahead. The SARB’s 2026 headline and core inflation expectations improved from its last meeting in November 2025 on assumptions of a stronger rand and lower oil prices. That said, the Bank wanted to be cautious and keep an eye on energy and food prices, particularly meat, following the outbreak of foot and mouth disease. Additionally, the Bank noted that geopolitical tensions remain elevated, diminishing the case for another rate reduction.

Rate to end 2026 slightly higher than envisioned in November: The SARB provided no explicit forward guidance. However, the Bank’s forecasts for its end-year repo rate level were more hawkish than at its last meeting in November: The Bank now sees its repo rate ending 2026 slightly above 6.25%—in November it forecasted the repo rate to end this year slightly below 6.25%—which largely mirrors our Consensus of 6.25%. The SARB is set to reconvene on 26 March.

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