The South African Reserve Bank (SARB) has raised its policy interest rate by 25 basis points to 7.25%, citing renewed fuel-price pressures, elevated services inflation and a more uncertain global supply environment.
The decision by the Monetary Policy Committee (MPC), announced on 23 September, was unanimous and takes effect from 25 September. SARB said the renewed increase in fuel prices had altered the inflation outlook after earlier indications that the shock was beginning to moderate.
South Africa’s annual consumer inflation rose to 4.4% in August from 4.3% in July, according to Statistics South Africa. Transport inflation was among the principal contributors, with the broader transport category recording an annual increase of 8.8%. Housing and utilities rose by 5.2%, while services inflation remained comparatively elevated at 5.1%.
SARB’s assessment also reflects developments beyond South Africa’s borders. The central bank said disruptions associated with conflicts in the Middle East and the Russia-Ukraine war were affecting global energy and food supply chains. It expects inflation to remain above its 3% target for a period before returning towards that level near the end of 2027. At the same time, food inflation has remained comparatively subdued, supported by favourable harvests and more stable meat prices.
The rate increase comes against a subdued domestic growth backdrop. Statistics South Africa reported that real GDP contracted by 0.2% in the second quarter of 2026, following 0.4% growth in the first quarter. Mining, manufacturing and trade were among the sectors weighing on output.
SARB has consequently lowered its full-year growth projection to 1.2%, from 1.4%. It nevertheless expects economic activity to strengthen during the second half of the year, while acknowledging significant downside risks.
The latest decision illustrates the policy challenge facing South Africa: containing inflationary pressures generated partly by external supply conditions while supporting an economy experiencing weak near-term growth.
