SARB: Uncertainty, inflation may delay rate cuts

He was speaking at the release of the first Monetary Policy Review (MPR) of 2025 on Tuesday.

The MPR, which outlines domestic and international developments affecting monetary policy, is released twice a year.

Kganyago said inflation expectations were now more stable, allowing the Bank to ease borrowing costs to support the economy.

He also cautioned that borrowing costs around the world are likely to remain higher for longer as it grows doubtful about the inflation outlook amid US President Donald Trump’s aggressive trade tariffs.

"We meet at a time of global economic turmoil. The optimism we shared in October has largely faded, replaced by heightened uncertainty driven by trade tensions.  

" At home, we’ve made significant progress on disinflation, along with improvements in the energy and logistics sectors. With inflation and expectations better contained, we’ve reduced borrowing costs to support economic activity.  

" However, risks to domestic inflation and growth have increased notably since the start of the year. The South African Reserve Bank remains committed to protecting the purchasing power of the rand by anchoring inflation and maintaining price stability,” Kganyago said.

Last month, the Reserve Bank decided to keep the repo rate unchanged at 7.5%.  

Kganyago said the decision came amid risks to the economic forecast on both the upside and the downside, with medium-term risks leaning toward the upside.

He emphasised that the SARB would proceed with caution amid a highly volatile global economic environment.

The governor said the South African Reserve Bank remained committed to keeping inflation in check—arguing that high prices hit the poorest citizens hardest.

He added that although inflation has declined, the Bank believes South Africa’s current target was still too high to achieve long-term stability.

"As the South African Reserve Bank, we support growth and employment primarily by reducing macroeconomic and financial instability. In doing so, we help create a more favourable environment for business in our country.  

"One thing is certain: South Africans—and consumers everywhere—dislike inflation. More importantly, high inflation is anti-poor. We take our responsibility to protect the most vulnerable seriously.  

" While inflation has declined significantly, our relatively high target remains inconsistent with true price stability—our constitutional mandate. Price stability is achieved when households and businesses no longer factor inflation into their day-to-day spending and investment decisions,” said Kganyago.

He said the Bank won’t rest until households and businesses can make decisions without constantly worrying about rising costs.

The central bank also notes that household spending is expected to underpin economic activity in the near and medium term, benefiting from low inflation and reduced borrowing costs.

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