The Reserve Bank has decided to keep the repo rate on hold despite the economy going through a low inflation environment.
This was announced by Reserve Bank Governor Lesetja Kganyago on Thursday, saying the repo rate will remain unchanged at 7%.
This is despite Kganyago’s projection that headline inflation is expected to be around 3.4% for 2025 and 3.6% in 2026 and then move back to 3% in 2027, which is the lower end of the Reserve Bank’s monetary policy target band and should result in an aggressive lowering of the interest rates.
Kganyago revealed that four members preferred to keep rates on hold. While two favoured a cut of 25 basis points.
Inflation risks
“Since September last year, we have reduced rates by 125 basis points. And we want to see how this is affecting the economy, how expectations evolve, and how inflation risks are resolved,” he said.
He said the growth forecast for the year has increased from 0.9% to 1.2% amid a weaker export outlook granted higher tariffs.
“We anticipate that headline inflation will rise over the next few months, peaking at around 4%. Our forecast now incorporates higher electricity price inflation, of nearly 8% rather than 6%. Given the recent pricing correction by NERSA,” said Kganyago.
In July, households got some relief when the repo rate was lowered by 0.25 percentage points, taking it to 7% from 1 August.
Kganyago said the decision was based on signs that inflation was steady. And the outlook for price stability had improved.
Consumer price inflation
The recent MPC decision comes after StatsSA released the annual consumer price inflation results on Wednesday. It decreased to 3.3% in August 2025, down from 3.5% in July.
Softer food and fuel prices helped reduce the overall inflation rate.
The monthly consumer price index (CPI) declined by 0.1%. With food and non-alcoholic beverages, transport, furnishings, household equipment and routine maintenance, and information and communication, all registering slight price drops.
Food and non-alcoholic beverage inflation dropped to 5.2% in August from 5.7% the previous month.
Prices for several staples either eased or remained flat. With white bread showing no annual increase and brown bread edging up just 0.4%.
By contrast, some items such as samp (14.8%) and maize meal (8.2%) were still sharply higher. Beef products remained expensive, although their monthly price increases were the lowest in several months.
Meat prices
“Beef mince recorded a 12-month change of 27.2% and a monthly rise of 0.2%. Stewing beef reached an annual rate of 32.3%, while its monthly change was 0.6%. Beef steak prices were 28.6% higher than a year ago. But went down by 1.2% between July and August,” reads the report.
Fuel prices also provided relief as petrol decreased by 28c a litre in August. This led to a 1.3% monthly decline. Diesel, however, rose by 2.5% over the same period. Overall, the annual rate for fuel inflation was -5.7%.
Non-food items that put upward pressure on household budgets included books, movie tickets and video games. All of which posted double-digit annual increases.
