South Africa's interest rates remain unchanged: What to expect in 2026?
South Africa could see another three interest rate cuts between now and mid-2027, analysts predict.
Image: AI / ChatGPT
South African interest rates are currently stable, with the South African Reserve Bank (SARB) deciding to keep the repo rate unchanged at 6.75% during its first Monetary Policy Committee (MPC) meeting on Thursday, January 29. As a result, the prime lending rate in South Africa remains at 10.25%.
In this meeting, four MPC members voted to maintain the current rate, while two expressed a preference for a 25-basis-point cut. This decision follows a slight increase in December’s headline Consumer Price Inflation (CPI) to 3.6% year-on-year, up from November’s figure of 3.5%.
SARB Governor Lesetja Kganyago indicated that the December CPI figure might represent the ‘peak’ and expressed optimism that inflation is expected to ease throughout 2026.
According to Nolan Wapenaar, head of fixed income at Anchor Capital, the current projections suggest that South Africa could experience approximately three more interest rate cuts over the next 18 months.
“The SARB’s Quarterly Projection Model (QPM) continues to indicate gradual rate reductions as inflation converges towards the target, although decisions will remain data-dependent and assessed meeting-by-meeting,” he stated
“The model suggests that SA will move from a slightly restrictive monetary policy stance toward a neutral stance in 2027. This implies three more interest rate cuts of 0.25% each between now and mid-2027, assuming that the economy progresses in line with the model,” says Wapenaar
However, challenges remain. Services and food inflation are currently above 4%, exacerbated by the ongoing foot-and-mouth disease outbreak, which poses risks to the overall inflation outlook. Electricity prices are also a significant concern, particularly due to widely reported miscalculations by the National Energy Regulator of South Africa (NERSA), which could result in a revenue shortfall of R76 billion, likely to be passed on to consumers.
South Africa's inflation rate over the last seven years.
Image: Anchor / Stats SA
In 2025, South Africa recorded an annual inflation rate of 3.2%, the lowest in 21 years. Assuming no major economic shocks or setbacks occur, the SARB aims to see inflation decrease in line with projections before a potential interest rate cut at the MPC’s next meeting in March, according to Wapenaar.
Investec economist Lara Hodes agrees that inflation expectations in South Africa have eased.
“The robust domestic currency, supported by a sluggish greenback and the surge in precious metals prices, has seen the SARB’s near-term inflation outlook fall to 3.3% year-on-year for 2026, down from 3.5% previously. However, upside risks remain, notably from inflated electricity prices," she said
Additionally, a fourth-quarter 2025 survey conducted by the Bureau of Economic Research revealed a significant decline in average inflation expectations among three professional groups, as Hodes added.
Bradd Bendall, BetterBond’s national sales head, also anticipates further interest rate cuts in the coming year.
“Looking ahead, with inflation remaining within one percentage point of the Reserve Bank’s 3% target and the rand holding firm against major currencies, conditions remain supportive for another cut in the prime lending rate in the coming months.”