The South African Reserve Bank unexpectedly left its benchmark repo rate unchanged at 7.00% on Thursday, defying market expectations of a 25-basis-point increase despite headline inflation hitting a two-year high of 5.0% in June.
The Monetary Policy Committee voted 4–2 to maintain borrowing costs, keeping the prime lending rate at 10.50%. Only three of 20 economists surveyed by Bloomberg had correctly predicted the interest rate pause.
Governor Lesetja Kganyago stated the current stance remains sufficiently restrictive. He emphasized that central bank policy aims to stabilize domestic price expectations without exacerbating weak economic growth amid recent severe global shocks.
The central bank revised its 2026 inflation forecast downward to 4.0% from 4.4%, while slightly raising full-year gross domestic product growth projections to 1.4% from 1.2% as second-half recovery prospects improve.
Following the unexpected hold, the rand tumbled as much as 2.5% to 16.76 against the U.S. dollar, while benchmark 10-year government bond yields surged 16 basis points to 8.96% in volatile trading.
The pause follows a May rate hike triggered by escalating Middle East conflict and spiking energy prices. Policymakers remain committed to anchoring inflation at their strict 3.0% target long-term.
