South Africa SARB Keeps Policy Rate on Hold, Against Consensus

Economics Research 23 July 2026 | 4:44PM BST

South Africa: SARB Keeps Policy Rate on Hold, Against Consensus

Bottom Line: The SARB kept its policy rate unchanged, against market pricing and Andrew Matheny | consensus for a 25bp rate hike but in line with our forecast. The decision resulted Goldman Sachs International from a split 4-2 vote within the MPC (with two hawkish dissents) and comes against the backdrop of the SARB’s assessment of a slight improvement to the inflation outlook since the May MPC meeting (despite upside inflation risks).

In our view, given the preemptive rate hike in May and a sufficient real rate buffer, the SARB can afford to keep rates on hold and adopt a wait-and-see approach with respect to the supply shock emanating from the Iran war. Our baseline predicated on our more benign inflation outlook than the SARB’s — assuming a moderation in oil prices — is for rates on hold and a resumption of easing in Q1 2027, even if we see some near-term risk of a rate hike in September (depending on oil prices and the Rand).

1. The SARB kept its policy rate on hold at +7.00%, in line with our forecast, but in a downside surprise to market pricing and consensus expectations for a 25bp hike (17 out of 20 analysts surveyed by Bloomberg forecast a hike). The decision resulted from a 4-2 split vote within the MPC (with two hawkish dissents in favour of a hike) and follows from a 25bp rate hike in May (also resulting from a 4-2 split vote, but with two dovish dissents). 2. With respect to inflation, the statement notes a slight improvement to the outlook since the May MPC and the SARB has reduced its near-term inflation forecasts, largely on lower food and fuel inflation. It expects headline inflation to remain above 4%yoy until early next year, with upside pressures stemming from higher services inflation, El Niño risks, and elevated inflation expectations. It noted the deterioration in inflation expectations and maintained an assessment of upside inflation risks. 3. With respect to growth, the statement notes that Q1 growth in South Africa was stronger than expected, close to 2%yoy, driven by higher net exports, which outweighed slowing domestic demand. The SARB anticipates that growth will decelerate in the coming quarters, amid weak consumer and business confidence, with risks skewed to the downside. 4. The alternative scenarios considered in this meeting were: (i) a continued rise in inflation expectations throughout this year; (ii) an adverse case, where oil prices reached $100/bbl in 2026 and slowly eased to $80/bbl by 2029; and (iii) a positive scenario, where oil is $78/bbl this year, easing to $60/bbl by 2029. In the

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first and second scenario, the model-implied policy response is an extra hike this year, above its baseline estimates, while in the third scenario, the model implies that rates start easing in the current year. 5. Our inflation outlook is slightly above the SARB’s in the near term (on non-core factors), but well below in 2027 on both core and non-core drivers. As such, while we see some risk of a rate hike in September if inflation risks increase (depending on the evolution of oil prices and the Rand), our baseline scenario that assumes a moderation in oil prices is for rates on hold and a resumption of easing in Q1 2027. Our outlook for inflation and rates therefore more closely resembles the SARB’s positive scenario.

Exhibit 1: Our Inflation Forecast is Slightly Above the SARB’s in the Near Term, but Well Below in 2027 5.0 0.4 %yoy

-0.6 3.0 -0.8 GS Headline 2.5 pp difference between Contribution Core SARB Headline -1.0 GS & SARB forecasts Contribution Non-core BBG Consensus Headline Contribution Headline 2.0 -1.2 Mar-26 Jun-26 Sep-26 Dec-26 Mar-27 Jun-27 Sep-27 Dec-27 Mar-26 Jun-26 Sep-26 Dec-26 Mar-27 Jun-27 Sep-27 Dec-27

Source: SARB, Bloomberg, Goldman Sachs Global Investment Research