Reserve Bank hikes interest rates for South Africa

The Reserve Bank’s Monetary Policy Committee (MPC) has voted to hike South Africa’s interest rates by 25 basis points.

This will bring the repo rate to 7.25%, and the prime lending rate to 10.75%, returning to levels last seen in June 2025.

The hike was announced by Reserve Bank Governor Lesetja Kganyago on Wednesday, 23 September, who said the decision was unanimous.

He explained that the Reserve Bank has raised its inflation forecast amid higher fuel prices. The MPC now expects inflation to return to the 3% target by the end of 2027.

Kganyago said the central bank sees upside risks to inflation. “A few months back, it seemed that the fuel-price shock might be unwinding, but now it has intensified,” he said.

“We are also seeing global rates moving higher. We have taken a measured approach to rate setting, in conditions of high uncertainty, but we remain focused on our price-stability mandate.”

“It is crucial that inflation reverts to 3% as the current shock fades, and we take responsibility for delivering that outcome.”

The committee’s latest decision comes on the same day that Statistics South Africa announced that CPI inflation rose to 4.4% in August.

This means inflation rose month-on-month, up from 4.3% in July. However, the print was slightly lower than expected.

Following the release of August’s inflation data, Standard Bank chief economist Elna Moolman said the CPI basket did not show much inflationary pressure.

Moolman said this is a welcome indication that South Africa is not seeing the feared second-round inflationary impact of the significant rise in fuel costs that the country experienced in 2026.

However, she noted that fuel prices rose in September and are expected to do so again in October.

“This means the Reserve Bank will likely remain concerned about the potential second-round effects of the increase in fuel prices,” she said.

This led Moolman to believe that the MPC would vote to hike South Africa’s interest rates.

However, she noted that this is likely the last hike in the current cycle, with interest rates expected to remain at this level for the foreseeable future.

This view is supported by the Reserve Bank’s Quarterly Projection Model, which sees the policy rate remain broadly stable for the remainder of the year.