The South African Reserve Bank raised its key repo rate by 25 basis points to 7.25% on September 23, in line with market expectations, to help steer inflation back toward its target. The decision was unanimous, reflecting policymakers’ assessment of persistent upside risks to inflation and downside risks to economic growth.
Consumer price inflation inched up to 4.4% in August from 4.3% in July, remaining close to the midpoint of the Bank’s 3%–6% target band. Policymakers noted that headline inflation is likely to climb above 5% later this year and in early 2027, driven mainly by higher fuel costs, before easing as the fuel-price shock wanes. Inflation is projected to fall back toward 3% by the end of 2027.
In line with this outlook, the SARB revised its inflation forecasts higher, now expecting an average rate of 4.4% in 2026 (up from 4.0% previously), 4.0% in 2027 (from 3.8%), and 3.2% in 2028 (from 3.1%).
On the growth front, the Bank lowered its forecast for 2026 GDP growth to 1.2% (from 1.4%), while leaving its projections for 2027 and 2028 unchanged at 1.7% and 1.9%, respectively.
