South Africa’s inflation is on course to meet the South African Reserve Bank’s (SARB) revised 3% target in 2026, with prices remaining broadly stable.
- South Africa’s central bank anticipates meeting its revised 3% inflation target by 2026, with inflation for 2025 forecasted at 3.2% to 3.4%.
- The main lending rate is currently 6.75%, with a possibility of two more 25-basis-point deductions this year, as per the central bank’s guidelines.
- The adopted lower inflation target has strengthened investor confidence, projecting South Africa as a favourable investment due to its substantial real rates.
- The South African rand is experiencing a substantial rally owing to rising precious metals prices and economic improvements.
South Africa’s central bank governor, Lesetja Kganyago, said on Tuesday that inflation is on course to meet the South African Reserve Bank’s (SARB) revised 3% target in 2026, with prices remaining broadly stable.
Annual inflation for 2025 is set to be released on Wednesday, and Kganyago indicated that SARB expects it to land between 3.2% and 3.4%, according to Reuters.
Last year, the government and central bank lowered the inflation target for the first time in 25 years to 3%, with a one-percentage-point tolerance band, previously forecasting this target to be achieved only by 2027.
“We expect that inflation this year would average 3.6% … if you break that inflation across the categories … all of them have got a three handle which then says that we are on course even for 2026 to meet our new inflation target,” Kganyago said.
The SARB’s main lending rate currently stands at 6.75%. Kganyago added that under the bank’s projection model, there is room for up to two further 25-basis-point rate cuts this year. The Monetary Policy Committee will hold its first meeting next week.
Rand’s rally
Meanwhile, Business Insider Africa previously reported that the South African rand is experiencing its strongest weekly rally in more than 20 years, supported by rising precious metal prices and signs of an improving economic outlook.
Investor confidence has also been bolstered by a cautious central bank and government efforts to stimulate growth in Africa’s largest economy, which has averaged under 1% over the past decade.
Last year’s adoption of a lower inflation target has reinforced expectations that South Africa will maintain its interest rate advantage over the United States.
According to Bloomberg Economics, upcoming inflation data could confirm that price pressures have peaked.
With a policy rate of 6.75% and projected inflation around 3.6%, South Africa’s real interest rate sits above 3%, making the rand attractive to yield-seeking investors.
