The Reserve Bank’s monetary policy committee (MPC) meets this week for its first interest rate decision of 2026.
While some analysts expect the MPC to keep the repo rate unchanged at 6.75%, calls are growing for a cut. The decision will be announced on Thursday.
While consumer inflation edged up slightly in December, closing the year at 3.6% (up from 3.5% in November), it brought the annual average for 2025 to 3.2% — the lowest since 2004 and well within the Reserve Bank’s official target of 3%, with a tolerance band of plus or minus one percentage point.
The rand has firmed to its best level in three years, while oil and food price pressures have eased compared with a year ago, and forecasts point to further moderation. Together, these shifts have strengthened the outlook for inflation to ease further in the months ahead.
Independent economist Elize Kruger believes the Bank has scope to cut interest rates this week.
“With inflation well under control, the economy still stuck in low growth mode (no evidence of demand-driven inflation pressure) and risk indicators having subsided, the current level of real interest rates in South Africa is too high,” she said.
Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER), also sees scope for a cut, noting that the fourth-quarter inflation outcome “undershot the [Bank’s] November forecast, while the [fourth-quarter] BER survey showed inflation expectations falling to record lows, signalling growing confidence in the 3% target”.
Nedbank economists, however, believe the MPC will prefer to hold “given that inflation has risen further above its 3% target and the [Bank’s] November forecast pointed to some near-term stickiness”. But they emphasise that “we see a pause rather than an end to the rate-cutting cycle”.
Beyond the interest rate decision, several notable economic indicators for December are due, including M3 money supply, private sector credit extension (PSCE), the producer price index (PPI), and the trade balance.
Nedbank projects PSCE growth to have eased slightly to 7.6% year-on-year in December, from 7.8% in November, which was boosted by Black Friday–related spending. Both corporate and household credit are expected to contribute, with corporate lending forecast to rise by 10.9% and household credit by 3.8%, supported by low interest rates and subdued inflation.
PPI is expected to remain unchanged at 2.9%, with food and fuel continuing to drive cost pressures.
Nedbank sees some easing in food inflation, as elevated meat prices begin to moderate, aided by favourable weather, lower logistics costs and a firmer rand.
Trade data for December will close out the week. South Africa recorded a preliminary trade surplus of R37.7bn in November, more than double the R15bn surplus reported in October.
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