Image Source: The Harbari Network
Local – The South African Reserve Bank (SARB) held its benchmark repo rate steady at 6.75% at its March 2026 Monetary Policy Committee (MPC) meeting, as the bank navigated the early fallout of the Middle East conflict against a backdrop of inflation that, for now, remained precisely on target.
The decision was unanimous. Headline and core inflation both printed at 3.0% in February, aligning exactly with the bank’s revised target, a moment of calm the bank warned would be short-lived as rising oil, gas and fertiliser prices began filtering through to domestic costs.
The near-term outlook had shifted materially, with fuel inflation alone expected to exceed 18% in the second quarter. Governor Lesetja Kganyago said the conflict had introduced a level of uncertainty the bank could not ignore, and that its forecasts already reflected the scale of the pressure building in the system.
“Higher energy prices will raise inflation in the near term. We expect the headline will soon accelerate to around 4%, with fuel inflation over 18% for the second quarter. Our baseline forecast then has a gradual unwinding of the shock, taking inflation back to 3% late next year,” Kganyago said.
The MPC stressed that risks remained skewed to the upside and presented two adverse scenarios. In the more extreme case, where the conflict persisted for over a year, oil held above US$100 per barrel and the rand weakened by 10% against the dollar, inflation could exceed 5% and force several rate hikes before price stability was restored.
Growth Under Pressure
Output grew by 1.1% in 2025, a modest improvement on recent years, though the bank flagged fresh downside risks tied to the conflict. Rising business confidence and stronger investment had offered some encouragement going into the year, but the governor warned the momentum was fragile.
“The ongoing war could interrupt the growth recovery. We have been encouraged by green shoots such as rising confidence and stronger investment, but conditions remain extremely uncertain,” Kganyago said.
Rates on Hold
The bank’s Quarterly Projection Model showed rates unchanged for a longer period, with cuts from the January projections postponed as the inflation outlook shifted. The MPC was clear that its response would be shaped by how conditions evolved, not by a fixed path.
“Our decisions will continue to be taken on a meeting-by-meeting basis, with careful attention to the outlook, data outcomes, and the balance of risks to the forecast,” he said.
