South Africa's central bank raised interest rates for the second time this year on Wednesday, stating that the war involving Iran has triggered 'large and persistent' price shocks and that tighter monetary policy was necessary to prevent elevated inflation from becoming entrenched.
The Monetary Policy Committee of the South African Reserve Bank (SARB) voted unanimously to raise the benchmark repurchase rate by 25 basis points to 7.25%, a move that aligned with the median forecast of economists polled by Reuters.
The decision follows rate increases by major central banks worldwide, including the United States Federal Reserve, the European Central Bank, and the Bank of Japan, against a backdrop of escalating hostilities in the Middle East.
'South Africa's growth recovery has slowed, while inflation has risen to levels well above our target,' SARB Governor Lesetja Kganyago said at a press conference.
Kganyago stressed the importance of returning inflation to the central bank's 3% target as recent pressure on fuel prices begins to ease. The statement came hours after official data showed year-on-year inflation edged up slightly to 4.4% in August.
Global Shocks Weigh on Economy
The SARB revised its near-term inflation forecasts upward and lowered its economic growth projection for the current year from 1.4% to 1.2%. The institution now projects that global inflation will exceed 5% before year-end and recede to around 3% only by end-2027.
'Global shocks are clearly hurting our economy,' Kganyago said, adding that services sector inflation remains a concern. Food prices, by contrast, have remained relatively contained, while the rand has shown resilience.
'Measured and Proportionate'
According to Kganyago, members of the Monetary Policy Committee discussed both holding rates steady and raising them by 50 basis points before settling on the 25 basis point increase.
'We are deliberate… and we made sure that the policy measure we adopted is proportionate to the problem we are trying to solve,' he told journalists during a question-and-answer session.
The SARB has one further meeting scheduled this year to decide on interest rates, set for mid-November.
Source: Diário Económico
Original article: https://www.diarioeconomico.co.mz/2026/09/24/mundo/africa/africa-do-sul-sarb-sobe-juros-para-725-e-alerta-para-pressao-inflacionista/
