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• Create Date July 23, 2026
• Last Updated July 23, 2026

Pulse - SARB keeps interest rates steady at July 2026 MPC Meeting

The South African Reserve Bank (SARB) kept the repo rate unchanged at 7.0%, balancing rising inflation risks against a still-fragile economic recovery. While South Africa's economy grew by 1.9% in the first quarter of 2026, growth was driven mainly by exports rather than stronger domestic demand, with weak consumer and business confidence, slowing investment and poor municipal performance continuing to constrain the economy. The MPC was divided on the decision, with four members voting to keep rates unchanged and two favouring a further 25 basis point increase, highlighting ongoing concerns about inflation. Higher oil prices following tensions in the Middle East, together with rising inflation expectations and administered price increases, are expected to keep inflation above 4% until early 2027, meaning interest rates are likely to remain elevated for the rest of 2026. The SARB also emphasised that poor municipal governance has become an increasingly important constraint on South Africa's long-term growth potential.

Despite the cautious stance on interest rates, the SARB has become slightly more optimistic about the medium-term outlook, revising its 2026 GDP growth forecast to 1.4%, with growth expected to strengthen to 1.8% in 2027 and 2.0% in 2028 as reforms in electricity and logistics support higher investment. Inflation is forecast to average 4.4% in 2026, easing to the Bank's preferred 3% target by 2028, allowing for a gradual reduction in interest rates from 2027 onwards. For the construction sector, the outlook remains mixed. Higher borrowing costs and elevated oil prices will continue to weigh on residential and commercial development while increasing transport and construction material costs. However, improving economic growth, ongoing structural reforms and an expected easing in interest rates over the medium term should gradually strengthen private sector investment, with public infrastructure spending remaining the main driver of construction activity in the near term.

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