The South African Reserve Bank’s Monetary Policy Committee (MPC) kept the repo rate unchanged at 7.0% on Thursday, holding the prime lending rate at 10.5%, in a decision that split the committee four votes to two in favour of holding steady, with the minority pushing for a further hike. The outcome landed as a mild surprise to parts of the market, which had priced in tightening given ongoing pressure from the Middle East conflict and a higher-than-expected June inflation print.
Johann Els, Chief Economist at PSG Financial Services, said the tone of the accompanying statement caught him off guard. “The statement was, in my opinion, far less hawkish than I expected. I thought they would put much more emphasis on the renewed Middle East conflict and the risks that higher oil and fuel prices pose to inflation. Instead, they treated that as one of a number of risk scenarios,” he said. Els noted that Governor Lesetja Kganyago had been pressed during question time on why the Bank hadn’t reacted to June’s inflation print of 5%, two percentage points above target. “He said monetary policy can do nothing about the June inflation number, or the July or August numbers for that matter. To me, that confirms once again that the Reserve Bank is clearly forward-looking,” Els said.
Els pointed out that the SARB had lowered its Brent crude assumption to around $82 a barrel from $91 previously, bringing its inflation forecast down from 4.4% to 4.0%, while lifting its GDP growth forecast from 1.2% to 1.4%. “That suggests they finalised these forecasts before the June inflation number was released, which is exactly what I expected,” he said, adding that his own forecast has since shifted to 4.2% for the year. “Overall, the statement was noticeably less hawkish than I expected, and I think that is probably the biggest takeaway from today’s meeting.”
At FNB, chief executive Lytania Johnson framed the decision as a source of stability for households and businesses. “The decision to keep interest rates unchanged provides welcomed stability for consumers and businesses navigating a challenging economic environment,” she said. “Through our insights, we continue to see households taking a disciplined approach to managing their finances, carefully balancing essential spending while actively seeking opportunities to improve their financial well-being.”
FNB Chief Economist Mamello Matikinca-Ngwenya said the MPC had to weigh weak growth against moderating inflation risk. “The MPC’s decision to keep the repo rate unchanged reflected a careful balancing of weak growth against inflation risks that have moderated since the previous meeting,” she said, noting real GDP growth is expected to improve only gradually, from 1.1% in 2025 to around 1.2% in 2026. She added that easing oil prices had given the committee room to pause. “Although inflation expectations remained above levels consistent with the new objective and geopolitical uncertainty in the Middle East continued to pose upside risks to energy prices, these risks appeared more contained than at the previous meeting.”
For the automotive sector, the National Automobile Dealers’ Association (NADA) welcomed the hold as a relief after months of bracing for tighter policy. “Given that much of the market braced for a tightening of monetary policy, the decision to hold interest rates steady is a welcome relief for consumers and vehicle retailers,” said NADA Chairperson Brandon Cohen. “Maintaining the prime lending rate at 10.50% provides much-needed support for consumer affordability and gives prospective buyers the confidence to move forward with finance applications.” Cohen linked the decision directly to the industry’s momentum so far this year, with NADA targeting more than 600,000 vehicle sales in 2026. “Vehicle purchasing is typically a long-term financial commitment, and interest rate stability plays a central role in driving consumer sentiment,” he said. “With rates remaining flat rather than increasing, monthly instalment calculations remain manageable.”
Taken together, the reactions point to a rate decision read as cautiously reassuring across sectors — an economist highlighting a softer-than-expected inflation outlook, a bank stressing household resilience, and an industry body crediting the pause with protecting hard-won sales momentum. The MPC’s Quarterly Projection Model points to rates holding steady through the rest of the year, with cuts only pencilled in from 2027, though Els cautioned that a faster-than-expected drop in oil prices could bring that timeline forward.