In a world described as fractured and fragile, the South African Reserve Bank (SARB) has chosen the path of unwavering caution, holding the repo rate steady at 6.75% in a high-stakes decision that pits resilient domestic progress against a tidal wave of global uncertainty.
The Monetary Policy Committee (MPC), in its first meeting of 2026, delivered a “hold” verdict, but the narrative from Governor Lesetja Kganyago was one of a nation navigating between a promising recovery and external chaos.
The decision was not unanimous, with two members pushing for an immediate 25 basis point cut, highlighting the delicate balancing act at play.
“A Rupture in the Global Order”
Governor Kganyago’s statement painted a stark picture of the international landscape confronting South Africa’s nascent economic stability. He framed the nation’s progress within a world under severe stress.
“Last year was marked by extreme global uncertainty, and 2026 has begun with a new round of shocks,” Kganyago stated.
“Geopolitical tensions remain elevated, reflecting what appears to be a rupture in the global political order. There are also new threats to central bank independence.”
He detailed a litany of risks: jittery markets, a potential AI bubble, and unsustainable global imbalances, noting China’s record trade surplus and a near-$2 trillion US fiscal deficit.
“These trends are not sustainable,” he warned.
The Domestic Glimmer: Steady Growth, Falling Expectations
Against this bleak global backdrop, South Africa’s own story is one of tentative hope. The economy is in its longest unbroken growth phase since 2018, driven by household consumption. Inflation, at 3.2% for 2025, is tantalizingly close to the new 3% target, and long-term inflation expectations have fallen to record lows.
“2025 was a watershed year for the South African economy,” Kganyago acknowledged. “Despite a volatile global backdrop, there was significant progress on domestic reforms… These efforts have been rewarded with lower borrowing costs, a rapid decline in inflation expectations, and steadier growth.”
Why Hold When You Could Cut?
The core of the MPC’s caution lies in the fear of undoing this hard-won progress. While the model forecasts gradual cuts ahead, the Committee is haunted by two specters: persistent services inflation (still above 4%) and specific domestic risks like soaring meat prices due to foot and mouth disease and a potentially massive electricity price correction.
The Governor outlined two stark scenarios demonstrating their rationale. In an adverse case of a weaker rand and higher oil, inflation could peak at 4%, delaying the return to neutrality by a year. In a favorable scenario, inflation could dip as low as 2.3%, allowing for faster cuts.
“These scenarios show that even quite large shocks… would not push inflation outside our tolerance range,” Kganyago explained.
“They also demonstrate how supply shocks interact with inflation expectations… Positive shocks get us there sooner, while negative shocks delay the process, but don’t block it.”
The Message: Stability is the New Growth
The decision is a clear signal. The SARB views its primary mission not as stimulating growth in the short term, but as cementing the foundational victory of low, stable inflation. They are betting that a solid platform of price stability—anchoring expectations at 3%—will do more for long-term investment and growth than a premature, stimulative cut that could be reversed by global storms.
“For monetary policy, our main contribution is to deliver on the new target, which means stabilising inflation at 3% over the next few years,” Kganyago concluded.
The unspoken implication: in a world experiencing a “rupture,” South Africa’s central bank is determined to be an anchor, not a sail tossed by every wind.
The hold is a statement of disciplined optimism. South Africa’s recovery is real, but the SARB has declared it too precious to risk on the volatile seas of 2026. The nation’s economic fate now hinges on whether domestic reforms can deepen fast enough to outpace the gathering gales from abroad.
