EMEA Economic Comment: South Africa: MPC surprises with on hold; scenarios key

Research evidence excerpt

EMEA Economic Comment: South Africa: MPC surprises with on hold; scenarios key

Global Research

23 July 2026ab

EMEA Economic Comment Economics

EMEA EmergingSouth Africa: MPC surprises with on hold;

scenarios key Gyorgy Kovacs

Economist

gyorgy.kovacs@ubs.com

+44-20-7568 7563

SARB keeps rates unchanged at 7.0% despite rising inflation pressures Nimrod Mevorach

The South African Reserve Bank (SARB) left its policy rate unchanged at 7.0%, against Strategist

both our expectations and consensus call for a 25bps rate hike. Four members of the nimrod.mevorach@ubs.com

+44-20-7567 0779

Monetary Policy Committee (MPC) voted for a hold, while two preferred a 25bps

increase. The decision comes despite recent inflation outcomes remaining above target,

with headline CPI rising to 5.0% y/y in June and services inflation accelerating to its

fastest pace since 2019. However, the committee judged that the 25bps hike delivered

in May had already moved policy into somewhat restrictive territory and therefore

viewed the current stance as appropriate for now. The decision also reflects the MPC's

assessment that the recent inflation overshoot remains largely driven by fuel prices,

though the MPC highlighted that "For services inflation, conditions look problematic,

with most components now well above 3%, including insurance, transport, and

housing". Inflation outlook has been supported by lower food inflation and a resilient

exchange rate. The SARB's latest Quarterly Projection Model (QPM) revised its 2026

headline inflation forecast lower to 4.0% from 4.4% previously, largely reflecting lower

oil price assumptions (Brent at $82/bbl in 2026 vs $91/bbl previously). The QPM's

forecast for the policy rate for end-2026 was nudged up by 9bps to 6.79% and by

20bps to 6.24% by end-2027.