SARB Monetary Policy Committee Increases Repo Rate to 7.25%

Posted 23 September 2026 Written by Acts Online
Category Banking & Finance

Brought to you by SAnews: The Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) has unanimously decided to increase the repurchase rate by 25 basis points to 7.25% per annum, effective 25 September.

Exercising its statutory mandate under section 224 of the Constitution of the Republic of South Africa, 1996, read with the South African Reserve Bank Act, No. 90 of 1989, the MPC moved to curb medium-term inflation expectations. The increase moves the benchmark commercial bank prime lending rate upward by 25 basis points to 10.75% per annum.

Inflation Outlook and Macroeconomic Revisions

SARB Governor Lesetja Kganyago stated that although domestic headline inflation stood at 4.4%, persistent supply shocks have generated upside risks to the price outlook. Long-term inflation expectations remain anchored near 4.0% rather than the SARB’s 3.0% target midpoint, which the Bank projects reaching toward the close of 2027.

Key economic findings and projections outlined by the MPC include:

  • GDP Growth Forecast: Annual gross domestic product growth for South Africa was revised downward to 1.2% (previously projected at 1.4%) following an economic contraction in the second quarter.
  • External Cost Pressures: Supply chain disruptions caused by conflicts in the Middle East and the Russia-Ukraine war have intensified fuel-price inflation and prompted rate increases by major central banks.
  • Food Inflation and Currency: Food price inflation decreased to its lowest level since 2010 due to robust agricultural harvests and stabilized livestock pricing, while exchange-rate resilience helped mitigate import price pressures.
  • Policy Trajectory: The SARB Quarterly Projection Model (QPM) projects rates to remain restrictive through the remainder of the calendar year to avert second-round inflationary effects before potential easing cycles initiate.

Impact on Statutory Reference Rates

The adjustment in the repurchase rate triggers statutory updates across several South African regulatory frameworks:

  • National Credit Act, No. 34 of 2005 (NCA): Maximum finance charge rates for credit agreements, unsecured loans, and credit facilities adjust upward in accordance with the formula tied to the reference repo rate.
  • Prescribed Rate of Interest Act, No. 55 of 1975: Default interest rates applied to litigation claims, legal damages, and unpaid judgments linked to the repo rate adjust accordingly.
  • Income Tax Act, No. 58 of 1962: The ‘official rate of interest’ applicable to low-interest or interest-free loans granted to trusts or employees under section 7C and the Seventh Schedule automatically shifts on the first day of the month following the repo rate adjustment.

What this means for you, your business, or your clients

  • For yourself: Personal variable-rate debt obligations, including vehicle asset finance and home loans, will incur higher monthly interest charges based on the new prime lending rate of 10.75%.
  • For your business: Update cost-of-capital assumptions, working capital facility budgets, and cash-flow forecasts to reflect increased borrowing costs across prime-linked overdrafts and commercial lines of credit.
  • For your clients: Advise corporate and individual borrowers on increased debt-servicing liabilities, recompute deemed-donation and fringe-benefit tax calculations under section 7C of the Income Tax Act, and recalculate statutory default interest on pending litigation claims.

Originally published at https://www.sanews.gov.za/south-africa/mpc-raises-repo-rate-725

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