South Africa: Central Bank Holds Rates at 7%, Defying Market Expectations

Herz — Business Desk · 23 July 2026 at 18:29 · 30s summary · 2 min read

What we know

The South African Reserve Bank (SARB), South Africa's central bank based in Pretoria, held its policy rate at 7% on July 23, 2026, according to ANSA. The decision contradicted expectations for a second consecutive rate increase.

SARB Governor Lesetja Kganyago announced the decision following the Monetary Policy Committee's meeting.

The prime lending rate set by South African commercial banks remains at 10.5%.

Context

The previous rate increase, decided in May 2026, was the first in three years. It was against this backdrop that markets had anticipated another hike in July 2026.

Outlook and scenarios

SARB's base case scenario forecasts unchanged rates for the rest of 2026. However, Kganyago left open the possibility of a rate cut by year-end.

In a downside scenario, inflation would remain 'persistently above target,' necessitating another rate increase and an extended restrictive monetary policy stance.

Inflation figures

SARB estimates inflation will remain above 4% for the rest of 2026.

Excluding fuel, goods prices have remained relatively contained thanks to a rand described as 'resilient': stable against the dollar since the start of the year and stronger against the euro, which has helped keep import prices down.

Service prices—including insurance, transport, and housing—now exceed 3%, signaling more solid underlying inflationary pressures.

Risk factors

Kganyago expressed concerns about weakening business and consumer confidence, as well as declining commodity prices.

For the first time, SARB cited deficiencies in municipal service delivery as a factor constraining the country's economic growth.