SARB keeps repo rate at 7.0% in split MPC decision as South Africa balances weak growth against sticky inflation

The South African Reserve Bank’s Monetary Policy Committee kept the repo rate unchanged at 7.0% in a split 4–2 vote during its July 2026 meeting in Pretoria. Officials said the decision balanced weak economic growth against persistent inflation, with some members favoring a pause after the previous 25 basis point hike in May.

Four members voted to hold the rate steady, while two favored a 25 basis point increase, reflecting ongoing debate within the committee over the appropriate response to persistent inflation and weak economic growth. The prime lending rate remained at 10.5%, consistent with the unchanged repo rate following the previous increase in May 2026.

The decision to maintain the repo rate at 7.0% was reached in a split 4–2 vote by the Monetary Policy Committee (MPC) during its July 2026 meeting in Pretoria, according to the South African Reserve Bank’s (SARB) official July Monetary Policy Statement.

The July decision follows the May 2026 MPC meeting, where the repo rate was raised by 25 basis points to 7.0% with a similar 4–2 split. The May statement showed four members supporting the hike and two opposing it, indicating a divided committee stance that has persisted into the current meeting. Officials said the July hold represents a pause rather than an end to monetary tightening, with future decisions to be guided by incoming economic data and inflation developments.

The SARB’s statement noted that while the inflation outlook has improved slightly since the last meeting, inflation remains elevated, and economic growth is weak. The committee described the outlook as “uncertain” and characterized the current policy stance as “somewhat restrictive,” suggesting that the existing rate level is appropriate for now given the trade-off between containing inflation and supporting growth. Policymakers weighed persistent inflation risks against concerns about sluggish domestic economic performance, according to official commentary accompanying the decision.

Inflation remains above the SARB’s 3% target, with headline inflation expected to average about 4.0% in 2026, down from the 4.4% forecast in May but still elevated. Core inflation is projected to hover around 4% until early 2027, averaging 3.8% in 2026, slightly higher than earlier forecasts. The SARB identified key upside risks to inflation, including potential increases in oil prices, renewed pressure on food prices, and elevated inflation expectations. These factors underpin the cautious approach to monetary policy, officials said.

On the growth front, the SARB revised its 2026 GDP growth forecast upward from 1.2% to 1.4%, mainly due to better-than-expected first-quarter outcomes. Despite this modest upgrade, the Bank described growth as weak overall. Analysts noted that the current borrowing costs, with a 7.0% repo rate and a 10.5% prime lending rate, pose challenges for households and businesses, but are seen by the SARB as necessary to anchor inflation expectations.

The split vote highlights internal divisions within the MPC over the pace and extent of further tightening. Market analysts pointed out that with only one committee member needing to change their view, a rate hike could be approved at the next MPC meeting scheduled for Sept. 23, 2026. The July decision’s hawkish language, despite the hold, signals that the SARB remains prepared to raise rates if inflation risks materialize. Officials reiterated that the policy stance is data-dependent and that future moves will respond to evolving inflation dynamics and external shocks.

Market reactions to the hold were mixed. The property sector and homebuyers welcomed the pause, as it stabilizes borrowing costs in the short term, according to local media reports. Economists were divided, with some surprised by the decision and others emphasizing the need to balance growth support with inflation control. Market commentary noted that the rand and bond yields remain sensitive to expectations of further SARB moves, with the 7.0% repo rate serving as a key anchor for financial conditions in the latter half of 2026.

The July 2026 MPC meeting continues a pattern of closely contested decisions, with the committee maintaining a cautious stance amid uncertain economic conditions. The SARB’s approach reflects the challenge of balancing sticky inflation pressures against modest economic growth, with officials signaling readiness to adjust policy as new data emerge. The next MPC meeting is set for Sept. 23, 2026, where the repo rate decision will again be closely watched.