May 28 2026 17:45
Lesetja Kanyago, SA Reserve Bank Governor
The South African Reserve Bank (SARB) increased interest rates by 25 basis points amid rising consumer prices caused by the US and Israel’s war on the Middle East. This was the first hike in three years.
The central bank’s Monetary Policy Committee (MPC) decided to increase the repo rate to 7.0%, with the prime rate rising to 10.50%. Four of the six members of the MPC called for the hike, while two called for rates to remain as they were.
South Africa was widely expected to see interest rate cuts at the start of the year as inflation was under control, the nation was dealt a blow when the USA and Israel launched relentless attacks on Iran.
Iran’s subsequent shutdown of the Strait of Hormuz, where 20% of the world’s oil flows from, led to massive hikes in fuel prices.
Fuel prices rose 11% in April and consumer price inflation rose to 4.0%. This was at the upper end of the Reserve Bank’s one-percentage-point tolerance band for its new 3% target.
The SARB said headline inflation would average 4.4% in 2026 and 3.7% in 2027, before returning to the 3% target in 2027.
This comes amid higher oil prices in its forecast, which have led to higher food prices due to higher transport and fertiliser costs.
The SARB lowered its growth forecast for South Africa over the next two years.
“However, we face a painful combination of higher global uncertainty and reduced disposable income,” the Bank’s governor Lestja Kganyago said.
“This will hit both investment and household consumption, which have been our main growth drivers,” he said.
He said that there has been one global inflation surge this decade, and another could start imminently. The Bank faces an uphill battle to bring inflation back to 3%.
alistair@propertyflash.co.za
