January 26 2026 18:15
Lesetja Kganyago, Reserve Bank Governor, picture courtesy of SA Reserve Bank
SOUTH AFRICA
The SA Reserve Bank left the repo rate unchanged on Thursday after the Monetary Policy Committee met for the first time in 2026. This was expected by many analysts.
The Bank left the repo rate at 6.75% and the prime lending rate at 10.25%. The decision was not unanimous, with four members of the MPC voting to hold and two voting to cut by 25 basis points. The repo rate is the rate at which banks lend to one another.
Reserve Bank governor Lesetja Kganyago said that 2025 proved to be a year filled with uncertainty and significant imbalances across markets.
“Despite these fragilities, asset prices have been resilient and global growth is holding up, supported by investments in AI, as well as fiscal stimulus in major economies,” he said.
“Inflation generally slowed last year, and many central banks have had space to adopt more neutral policy settings. Financing conditions for emerging markets remain benign,” he said.
The SARB believes that local inflation peaked in December at 3.6%, with the expectation that it will now continue to fall.
However, there are concerns about food inflation, driven by the outbreak of Foot and Mouth Disease, as well as a rise in administered costs, such as electricity prices, where Eskom is looking to draw billions of rands more from consumers.
Against the backdrop of higher global uncertainty and a gradual slowing of inflation locally towards the 3% target, the SARB elected to hold rates.
The US Federal Bank’s held rates on Wednesday, which added support to the call for a hold in South Africa.
Looking ahead, South Africa’s rate-cutting cycle is expected to continue, despite the hold. Forecasts are for 50 bps of cuts in 2026, with a possible 25 bps cut in 2027.
The SARB’s Quarterly Projection Model continues to forecast gradual rate cuts as inflation subsides.
Dr Andrew Golding, chief executive of the Pam Golding Property group said a cut was justified as he would given it suits home buyers.
“With inflation edging slightly higher to 3.6% in December 2025 from 3.5% in November, and despite the fuel price relief expected in February 2026 following a significant fuel price reduction in January, the Monetary Policy Committee adopted a cautious stance by keeping the repo rate unchanged at 6.75%,” he said.
“While the decision was not what existing mortgage holders and prospective homebuyers seeking credit were hoping for, most market commentators believe that, with inflation remaining contained, there is scope for up to two 25bps repo rate cuts during 2026. The outlook for interest rates is supported by ongoing rand resilience, easing inflation expectations, and softer global oil prices,” he said.
“Although the luxury market is expected to continue experiencing steady demand, activity across major metros is likely to be concentrated in more affordable price bands and value-driven suburbs, as lower interest rates support increased participation by first-time buyers. Cape Town is set to remain the strongest metro overall, but sustained price growth and limited stock available for sale are likely to redirect interest toward surrounding small towns, particularly coastal and lifestyle destinations,” he said.
247@propertyflash.co.za
