Maarten Ackerman, Citadel Chief Economist

The South African Reserve Bank (SARB) decided to keep interest rates on hold today, despite a near-even split in market expectations. While roughly half of market participants had anticipated a rate cut, the other half expected the SARB to remain cautious, possibly deferring any easing to its November 2025 Monetary Policy Committee (MPC) meeting.

INFLATION, GROWTH AND A FORWARD-LOOKING APPROACH

According to Citadel Chief Economist, Maarten Ackerman, “The decision reflects the SARB’s cautious stance and its view that the outlook for inflation and growth remains balanced.”

“Although inflation has been trending downward, with the latest print at just 3.3%, while the rand

remained relatively stable, the SARB has chosen to take a forward-looking approach. This means considering potential inflationary pressures in 2026 before inflation is projected to return to 3% by 2027,” he explains.

DOMESTIC CONDITIONS SUPPORTIVE, BUT RISKS REMAIN

Ackerman notes that, “While current domestic conditions arguably support rate cuts, given South Africa’s (SA’s) weak economic growth and stable currency, the MPC is clearly weighing longer-term risks, including the possibility of lowering the inflation target to further anchor expectations.”

GLOBAL HEADWINDS ADD TO CAUTION

“Global factors have also influenced the decision, rising trade tariffs and ongoing geopolitical tensions could easily disrupt growth and reignite inflation. Against this backdrop, the MPC is erring on the side of caution,” Ackerman says. Four committee members voted to keep rates unchanged, while only two supported a cut.

IMPLICATIONS FOR CONSUMERS AND INVESTORS

For SA’s highly indebted consumers, the decision offers little immediate relief. However, investors holding cash continue to benefit from some of the highest real yields globally, making SA an attractive destination for yield-seeking capital within a diversified portfolio.

DIVERGENCE WITH THE US FED AND RAND OUTLOOK

Interestingly, the SARB’s decision follows a 25-basis point rate cut by the United States (US) Federal Reserve (Fed) yesterday. This divergence has widened the interest rate differential between SA and the US, potentially supporting the rand through increased carry trade appeal. Combined with sustained global demand for gold and a softer US dollar, this dynamic points to a stable rand heading into year-end.