The South African Reserve Bank Monetary Policy Committee (SARB MPC) today decided to leave rates unchanged.
“Recent surges in oil prices and the sharp depreciation of the rand have set the stage for increased inflationary pressures,” says FNB CEO Harry Kellan. “However, South Africa’s economy continues to exhibit a strong structural bias towards low inflation.
“Against this backdrop, we welcome the Monetary Policy Committee’s decision to hold rates steady, which provides important relief and certainty for households and businesses navigating a still challenging economic environment.”
Mamello Matikinca-Ngwenya, chief economist at FNB, comments: “As we note monetary policy decisions across the globe, it is evident that central banks will be cautious as the ramifications of the ongoing war in the Middle East unfold.
“While South Africa’s current inflation rate is at the 3% target and surveyed inflation expectations showed further softening in 1Q26, the country is a net-importer of petroleum products and will be exposed to higher energy costs from April. A prolonged period of elevated oil prices would shift South Africa from a period of enjoying fuel price deflation to one of renewed fuel-driven inflationary pressure.
“Unfortunately, fuel price deflation, alongside slow food and core goods inflation, compensated for unagile price-setting behaviour in the economy. Therefore, upside fuel and rand risks, along with the potential for second-round effects, raise the degree of uncertainty around the inflation trajectory and limits the SARB’s room to continue cutting rates,” she adds.
“While we acknowledge that we are confronting an inflation shock that is likely to reverberate across the entire economy and sustain shifts in market expectations, we remain constructive on the South African economy’s outlook. Continued efforts to improve the country’s competitiveness and productivity should uphold longer-term growth prospects and structurally lower inflation and interest rates,” Matikinca-Ngwenya explains.
Kellan emphasises that in an uncertain environment, both consumers and businesses should remain mindful of their borrowing decisions and overall affordability. He urges customers to actively manage their finances and simplify their banking.