The South African Reserve Bank (SARB) has issued a cautionary outlook in its latest Monetary Policy Review.
According to Bloomberg, it warned that global borrowing costs are likely to remain higher for longer as economic uncertainty escalates, particularly due to aggressive trade policies introduced by US President Donald Trump and domestic political tensions.
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“Confidence around the medium-term outlook has reduced significantly due to heightened global trade tensions and elevated domestic uncertainties,” the Reserve Bank stated in the report.
Although markets had anticipated further interest rate cuts from major central banks, the SARB now believes the emergence of new global risks may sustain elevated interest rates over a longer period.
Tariffs on trading partners
Since President Trump’s return to office in January 2025, the United States has adopted a protectionist trade regime, most recently announcing reciprocal tariffs on trading partners.
A 10% import tariff has already been implemented, while higher tariffs – up to 50% – have been postponed for 90 days.
SARB Governor Lesetja Kganyago remarked that global confidence, once cautiously optimistic, has now given way to widespread uncertainty.
“The confidence regarding global economic developments we projected in October has largely evaporated,” said Kganyago.
“This has been replaced by high economic uncertainty here at home.”
While inflation remains largely in check and near the 4.5% midpoint of the central bank’s target range, the SARB warned that risks to both inflation and growth have risen significantly since January.
The central bank held its benchmark interest rate at 7.5% last month after delivering three consecutive 25 basis point cuts since September 2024.
“With the recent softening in inflation, the SARB has cut interest rates by a cumulative 75 basis points since September 2024, reducing the degree of policy restrictiveness,” the bank noted in a post on X (formerly Twitter).
However, the central bank emphasised that the current policy stance remains appropriate given rising medium-term risks.
Domestic VAT hikes add to inflation outlook
Contributing to local uncertainty is a proposed two-stage VAT increase, with a 0.5 percentage point hike on 1 May, followed by another in 2026.
The SARB estimates this will add 0.2 percentage points to headline inflation annually, further complicating the inflation outlook.
The report concludes with a clear message: while inflation expectations are currently contained, geopolitical tensions, fiscal uncertainty, and fragile coalition politics could undermine stability and derail economic recovery if not carefully managed.
Reminder
The South African Reserve Bank elected to keep interest rates on hold in the country when its Monetary Policy Committee met for the second time in 2025 on 20 March.
As a result, the repo rate is currently at 7.5% while the prime lending rate is 11%.
The decision was not unanimous with four committee members voting to keep rates on hold, while two others preferred a 25 basis point cut.
Who are the SARB’s MPC?
The South African Reserve Bank’s monetary policy committee meets every second month to announce changes – if any – to the country’s repo and prime lending rates.
The meetings in 2025 are scheduled to take place in January, March, May, July, September and November – and always on a Thursday at 15:00.
Currently, the committee comprises of six people, with Lesetja Kganyago holding the position of governor of the SARB.
| Month | Date | Outcome |
| January | 30 January | 25 basis point cut |
| March | 20 March | No change |
| May | 29 May | ? |
| July | 31 July | |
| September | 18 September | |
| November | 20 November |
Monthly bond repayment table
The South African website’s table below shows the current monthly bond repayments on various bond values over a 20-year period assuming no deposit and repayments at prime.
| Bond | Current (11%) |
| R750 000 | R7 741 |
| R800 000 | R8 258 |
| R850 000 | R8 774 |
| R900 000 | R9 290 |
| R950 000 | R9 806 |
| R1 000 000 | R10 322 |
| R1 500 000 | R15 483 |
| R2 000 000 | R20 644 |
| R2 500 000 | R25 805 |
| R3 000 000 | R30 966 |
| R3 500 000 | R36 127 |
| R4 000 000 | R41 288 |
| R4 500 000 | R46 448 |
| R5 000 000 | R51 609 |
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