No interest rate relief for South Africa in January

The Reserve Bank’s Monetary Policy Committee (MPC) has announced that interest rates will remain unchanged.

This means the repo rate will stay at 6.75% and the prime lending rate at 10.25%.

On Thursday, 29 January, the MPC voted to keep interest rates unchanged following a 25 basis point cut in November 2025. The decision was not unanimous, with two members favouring a 25-basis-point cut.

The November cut marked the sixth cut in the current cycle, which has seen interest rates come down by 150 basis points so far.

In the preceding hiking cycle, interest rates were raised to decade highs, with a cumulative 475 basis points of hikes.

This was done to bring South Africa’s high, sticky inflation, which had shot up during the Covid-19 pandemic, under control.

In September 2024, the Reserve Bank felt that inflation had been sufficiently tamed and implemented the first cut of the current cycle.

In announcing the MPC’s latest decision on 29 January, Reserve Bank Governor Lesetja Kganyago explained that the committee assessed the risks to South Africa’s inflation outlook as balanced.

He noted that inflation ticked up to 3.6% in December 2025, but that the average for the year was 3.2%, which is close to the Reserve Bank’s new 3% target. “We expect inflation to slow again this year,” he said.

The governor said inflation expectations have fallen, with the latest survey showing longer-term expectations at record lows.

“We look forward to expectations declining further, as South Africans experience ongoing lower inflation and learn more about the new target,” he said.

South Africa’s inflation target was officially lowered to 3% in November 2025, a lower and narrower target than the previous 3% to 6% range.

Kganyago said the Reserve Bank’s near-term inflation forecast has fallen, with the rand stronger and a lower oil price assumption.

However, he said the bank is keeping an eye on food inflation, especially meat prices, which are being affected by a serious outbreak of foot-and-mouth disease across the country.

“We are also concerned about electricity prices, given that NERSA’s price correction may rise from R54 billion to R76 billion,” he said.

The MPC’s decision to keep rates unchanged in January came amid split expectations from experts regarding which way the Reserve Bank would lean.

Prior to the announcement, Ashburton Investments’ Head of Fixed Income, Albert Botha, said the MPC’s decision comes in an environment where things are consistently in flux.

“Currently, there is considerable uncertainty about the direction of global interest rates over the next couple of months, but both local and global rates are certainly in a downward phase over a longer time horizon – yet the exact timing of further cuts remains unclear,” he said.

However, he said that given the shift in South Africa’s inflation environment, together with the strong rally in the rand, multiple repo cuts appear likely.

Over the next 12 to 18 months, Botha said the local markets are pricing in roughly three to four cuts of 25 basis points, with expectations placing the repo rate in the 5.75% to 6.00% range. 

“If global policy rates continue to fall and the SARB remains firmly in control of inflation, South Africa could see a long-term average repo rate of around 5.5%,” he said. 

“This would be a significant boon for the local economy, particularly the housing market, and would also support both corporate and government borrowers through structurally lower funding costs.”