Kganyago shares good news about interest rate cuts in South Africa

South African Reserve Bank Governor Lesetja Kganyago said on Tuesday that inflation was on course to meet the bank’s new target of 3% in 2026 as prices remained stable.

With annual inflation for 2025 due to be released on Wednesday, Kganyago said the South African Reserve Bank (SARB) expected it between 3.2% and 3.4%.

Last year, South Africa’s government and central bank lowered the inflation target for the first time in 25 years to 3%, with a one-percentage-point tolerance band on either side. The bank had initially forecast that it would be reached by 2027.

“We expect that inflation this year would average 3.6%. If you break that inflation across the categories, all of them have got a three-handle which then says that we are on course even for 2026 to meet our new inflation target,” Kganyago told Reuters on the sidelines of the World Economic Forum meetings in Davos. 

The central bank’s main lending rate is currently at 6.75%.

Kganyago said that under the bank’s projection model, there was still scope for another two 25 basis points of rate cuts this year.

The Reserve Bank’s Monetary Policy Committee (MPC) is set to meet again on 29 January 2026 to determine the country’s monetary policy.

The 29 January meeting will be the second since Finance Minister Enoch Godongwana formally adopted the target, a move long backed by central bank officials.

Policymakers resumed rate cuts at their November meeting, lowering borrowing costs by 25 basis points.

Kganyago said after that decision that he and colleagues agreed there was scope “to make the policy stance less restrictive in the context of an improved inflation outlook,” helped by a stronger rand and softer oil prices.