The South African Reserve Bank’s Monetary Policy Committee (MPC) has left the repo rate unchanged.
The latest announcement follows a 25 basis point repo rate cut in November, which came after the Reserve Bank lowered its official inflation target to 3% with a 1% tolerance band.
The rate was left unchanged as inflation continues to sit comfortably within its target range. On an annual basis, South Africa’s inflation rate averaged 3.2% in 2025, marking its lowest level in 21 years.
Inflation edged slightly higher in December, with headline consumer price inflation rising to 3.6% from 3.5% in November.
Rand firming against dollar
Despite these pressures, overall inflation remained well within the Reserve Bank’s target range, reinforcing confidence that price stability is being maintained.
The rand has also shown signs of resilience. By 3pm on Thursday, the rand was trading at R15.75 against the US dollar. And it is supported by growing concerns about the outlook for the US economy.
“Markets are jittery, and precious metals like gold have received safe-haven flows. There are also ongoing risks of an Artificial Intelligence (AI) bubble. Furthermore, global imbalances have become very large. For instance, China’s trade surplus was over a trillion dollars last year, a new record. Meanwhile, government debt is still growing fast in key economies, with the US fiscal deficit, for example, approaching two trillion dollars. These trends are not sustainable,” said Kganyago.
“Despite these fragilities, asset prices have been resilient and global growth is holding up. It is supported by investments in AI, as well as fiscal stimulus in major economies. Inflation generally slowed last year. And many central banks have had space to adopt more neutral policy settings. Financing conditions for emerging markets remain benign.”
Strengthening against the dollar means imports will be cheaper and bring stability to fuel and food inflation. Kganyago emphasised that the rand did not only strengthen against the US dollar but other currencies. Also taking the second place as the best performing currency in emerging market (EM) universe.
Gold, other commodities boost the rand
Economist Mandla Maleka told Sunday World that the rand has been strong against the dollar since towards the end of 2025 due to surging gold prices. On Monday, gold reported an all-time high of over $5, 000 per ounce.
Maleka said this was because gold prices have surged far beyond expectations. And this surge has dragged along silver and platinum.
He said gold reported an all-time high of over $5, 000 per ounce on Monday. And he added that silver had also reached $100 per ounce.
“Countries well-endowed and comparatively well supplied with both gold and silver could easily realise stronger currencies through increased demand for the commodities. South Africa is among those countries; hence, the ZAR has been very strong.”
Rand remains vulnerable
Head of Revenue of Verto, James Berto, said while the MPC’s choice to leave interest rates unchanged may avoid an immediate market response, it does not reduce how vulnerable the rand remains to global influences, including US interest rates, commodity prices and geopolitical tensions.
“For South African importers and exporters, this means currency volatility remains a key risk. Regardless of where the repo rate sits. Sudden moves in the rand can materially affect pricing, profitability and cash-flow planning. Particularly for SMEs operating on thin margins.
“In this environment, businesses need certainty where they can control it. Actively managing FX exposure, improving settlement speed and reducing cross-border payment friction can help insulate companies from rand volatility. Even during periods of policy inertia.”
