The Reserve Bank usually follows the US Fed’s decision on the repo rate. The Fed opted to leave interest rates unchanged on Wednesday.
The South African Reserve Bank (Sarb) opted not to cut the repo rate on Thursday after giving consumers an early Christmas present in November when it lowered the rate by 25 basis points to 6.75%.
This time, the bank was more cautious after the start of 2026 followed the same pattern of geopolitical risks as in 2025.
Jee-A van der Linde, senior economist at Oxford Economics Africa, says they expected today’s repo rate decision to be a close call. “The hawks ultimately prevailed, as the Sarb governor struck a cautious tone, sceptical of global economic trends but more receptive to favourable dynamics at home.”
He points out that the Monetary Policy Committee (MPC) statement does not make clear why most members preferred to keep the repo rate unchanged. “We suspect the uncertain global backdrop and the upward trend in services inflation may have been factors.
“The US Fed’s decision may also have played a role. On that score, we anticipate an extended pause. However, unless conditions deteriorate markedly before the next MPC meeting in March, we continue to see scope for further policy easing and forecast a 25 basis points cut in the first quarter of 2026, followed by additional easing later in the year.”
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Geopolitical and macroeconomic uncertainty risks prevented repo rate cut
Albert Botha, head of fixed income at Ashburton Investments, says it seems the main concern for the MPC and the governor remained heightened geopolitical risk and global macroeconomic uncertainty. “The governor specifically referred to asset price bubbles and uncertainty around artificial intelligence and global imbalances as potential risks.”
He says while there may have been scope to begin easing at this meeting, a more cautious approach is understandable given current global conditions. “This strategy also preserves policy flexibility and reduces the risk of a policy misstep.”
Prof Raymond Parsons, economist at the NWU Business School, says as widely expected the MPC by a 4-2 majority opted to pause its interest rate easing cycle and leave the repo rate unchanged for now.
“The MPC majority view provided a plausible case as to why it was considered necessary to further entrench inflationary expectations amid ongoing global uncertainty before making a further cut in borrowing costs for business and consumers.
“However, the minority MPC view had a more convincing case for an immediate rate cut of another 25 basis points. The latest data indeed showed that the inflation outlook improved sufficiently to justify earlier policy relief, rather than extending the pause.
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Too many risks remaining to cut repo rate now
Frank Blackmore, lead economist at KPMG South Africa, says the reasons the MPC gave for keeping interest rates on hold were the number of risks that remain. “Although the Sarb views these risks as broadly balanced, they still pose upside risks to inflation.
“Most notably, these include external risks such as geopolitical and trade-related pressures facing South Africa, as well as internal risks, including potential increases in administered prices, particularly electricity tariffs.”
Hayley Parry, money coach and facilitator at 1Life’s Truth About Money, says the MPC’s decision to leave interest rates unchanged today brings certainty, but not relief for South African households. “Many consumers may have been expecting an interest rate cut, particularly given that economists are forecasting reductions of up to 0.5 percentage points by the end of the year.
“While today’s decision does not ease financial pressure, it does provide much-needed certainty. This certainly matters because when households know their repayments, especially monthly bond and loan repayments, will remain unchanged, they are better able to plan and manage their finances, even in a strained environment. Predictability allows consumers to budget more effectively and avoid unexpected shocks.”
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No repo rate cut does not mean it was all bad news
FNB CEO Harry Kellan points out that today’s decision does not change expectations of improving economic conditions this year. “With the rand relatively stronger, fuel prices lower and inflation pressures limited, our projections suggest a strong likelihood of further rate cuts later in the year.
“This should help support business confidence and provide welcome relief for consumers as the year progresses. While the outlook remains positive, we are keeping a close watch on global events and any possible impact on the local economy.”
Toni Anderson, head of home services at Standard Bank, says the Sarb’s decision to hold the repo rate steady provides welcome certainty for homeowners and prospective buyers, reinforcing a period of stability in the residential property market.
“While the repo rate remains unchanged, the cumulative effect of earlier rate cuts has already begun to improve affordability and buyer sentiment. Since the easing cycle started towards the end of 2024, Standard Bank observed increased engagement from prospective homeowners, with steady home loan application activity reflecting renewed confidence in the market.”
Anderson points out that a stable rate environment gives buyers the opportunity to plan with greater certainty and it supports more balanced decision-making. “For sellers, this stability encourages realistic pricing, which remains a key driver of successful transactions in the current market.
“Holding rates at current levels allows households time to adjust to earlier relief, while providing a supportive backdrop for sustained recovery in housing demand across select regions.
“For prospective buyers who have been waiting on the sidelines, a period of rate stability may present an opportunity to enter the market with greater confidence, particularly while competition remains measured and affordability has improved relative to recent years.”