SARB hikes interest rates in blow for South Africans in debt

The South African Reserve Bank (SARB) raised interest rates on Wednesday by 25 basis points, taking the repo rate to 7.25% and the prime lending rate to 10.75%.

The Monetary Policy Committee (MPC) voted unanimously for the increase as renewed fuel-price pressures threaten to push inflation higher and economic growth remains under pressure.

SARB Governor Lesetja Kganyago said the global economy had weathered some of the energy shocks experienced in 2026, but warned that vulnerabilities were increasing.

“Shocks are multiplying, and vulnerabilities are increasing. The global economy is not in a healthy space,” he said.

Economic growth under pressure

The rate increase comes after South Africa’s economy contracted by 0.2% in the second quarter, highlighting the challenges facing businesses and households.

Despite the contraction, the SARB expects economic activity to rebound during the second half of the year.

Annual growth is forecast at 1.2%, with medium-term growth projected at around 2%.

However, Kganyago warned that the risks to the growth outlook remain skewed to the downside.

Fuel prices drive inflation concerns

The latest rate decision has been heavily influenced by renewed pressure from fuel prices.

Petrol prices moderated between June and August but have since come under renewed pressure. The SARB said petrol currently has an average under-recovery of R2.83 per litre, increasing the risk of further pump-price increases.

The central bank expects headline inflation to move above 5% later this year and into early 2027 before easing as the fuel shock fades.

“We currently expect inflation to be back around 3% towards the end of 2027,” Kganyago said.

For businesses, higher fuel costs could feed into transport, logistics, manufacturing and operating expenses, while households face additional pressure on disposable income.

Food inflation offers some relief

Not all inflationary pressures are moving higher.

The SARB said food inflation is at its lowest level since 2010, helped by strong harvests and a levelling off in meat prices following the foot-and-mouth disease outbreak.

Import prices have also remained contained, with the rand proving relatively resilient during the year.

The central bank warned that drought pressures associated with El Niño could pose a risk to agricultural conditions, although conditions remain broadly favourable for now.

What happens to interest rates next?

The 25-basis-point hike was broadly in line with market expectations ahead of the MPC meeting.

The SARB’s Quarterly Projection Model indicates that the policy rate could remain broadly stable for the rest of the year before cuts become possible later in the forecast period as inflation moves towards the 3% target.

Kganyago stressed that the projected rate path is only a guide and does not represent a commitment by the MPC.

Future decisions will continue to depend on incoming economic data, the inflation outlook and the balance of risks.

The SARB’s next MPC meeting will take place on Thursday, 19 November, which will be the final interest-rate decision of 2026.

Dates and outcomes of SARB MPC meetings in 2026

Month	Date	Outcome
January	29 January	No change
March	26 March	No change
May	28 May	25 bps hike
July	23 July	No change
September	23 September	25 bps hike
November	19 November	TBA