Unions across the board reacted angrily to the South African Reserve Bank’s decision to keep the repo rate on hold, as households continue to grapple with stubborn food inflation and looming electricity price hikes.
Addressing reporters on the decision by the Bank’s monetary policy committee (MPC) on Thursday, governor Lesetja Kganyago said inflation was beginning to trend within the committee’s broad expectations and growth data looked positive.
“Inflation last year was 3.2%, close to our 3% objective,” he said. “Inflation was a bit higher towards the end of the year, mainly because of temporary factors. The December print came in at 3.6%. However, we expect this was the peak, and that inflation will slow from here.”
The MPC decided to keep rates on hold at 6.75%, with two members favouring a 25 basis point cut and four favouring a hold. Kganyago said the near-term inflation forecast has fallen, with the rand stronger and a lower oil price assumption.
“We are, however, keeping an eye on food inflation, especially meat prices, which are being affected by a serious outbreak of foot and mouth disease,” Kganyago said. “We are also concerned about electricity prices, given that Nersa’s price correction may rise from R54bn to R76bn.
“More positively, inflation expectations have fallen, with the latest survey showing longer-term expectations at record lows. We look forward to expectations declining further, as South Africans experience ongoing lower inflation and learn more about the new target.”
The SARB needs to seize the opportunity of an inflation rate that has been consistently falling and, at 3.5%, is well within the inflation target range, and utilise its March MPC meeting to slash the repo rate by at least 50 basis points
— Matthew Parks, Cosatu parliamentary liaison officer
Tertia Jacobs, treasury economist at Investec, said the decision to keep rates on hold was broadly expected, as there were compelling arguments to support a hold as well as a cut.
“Our baseline forecast was for the Reserve Bank to keep interest rates unchanged. But we also flagged that it could have been a 50-50 call, because there were very strong reasons to argue for a rate cut. However, the MPC tends to proceed cautiously and pause after a rate cut, as was the case in September, to assess developments.
She said a total of 50bps of rate cuts are expected in 2026, with another cut in 2027 if inflation converges to the 3% target. In this respect, movements in the rand and oil price will be closely monitored.
Matthew Parks, parliamentary liaison officer for Cosatu, said the ANC-aligned labour federation was deeply disappointed that the Bank failed to cut the repo rate to provide breathing space to millions of workers struggling with the rising cost of living.
“The SARB needs to seize the opportunity of an inflation rate that has been consistently falling and, at 3.5%, is well within the inflation target range, and utilise its March MPC meeting to slash the repo rate by at least 50 basis points,” he said.
“Workers are supporting relatives who cannot find jobs in an economy stumbling along at an average 1% annual growth and with a 42.4% unemployment rate, with deeply alarming numbers of jobs being shed by various companies.”
The Federation of Unions of South Africa (Fedusa) said the decision not to cut the repo rate was a slap in the face to many workers, households and South Africans at large.
“Hard-working South Africans are already struggling to survive in the current economic climate,” the union said. “The cost of living remains high, and many households continue to experience severe financial strain.”
Fedusa said that while it recognised that an unchanged repo rate provides stability for the financial system, it offers no relief to workers and households struggling to make ends meet.
Mametlwe Sebei, president of the General Industries Workers Union of South Africa (Giwusa), called Thursday’s decision and the Bank’s new 3% inflation target an act of economic sabotage, designed to strangle the economy and justify perpetual high interest rates.
“The conditions for a significant rate cut have never been more favourable, with inflation in December at 3.6% and 3.2% for the whole of 2025,” Sebei said. “These inflation rates are not only within the old target band of 3-6%, but also well below its halfway point of 4.5%.”
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