South Africa’s inflation rate is expected to align with the South African Reserve Bank’s (SARB) revised 3% target in 2026, as price pressures remain largely contained, according to central bank governor Lesetja Kganyago.
Speaking yesterday, Kganyago said inflation trends indicate steady progress toward the target, noting that annual inflation for 2025—set to be released on Wednesday—is projected to fall between 3.2% and 3.4%, based on estimates cited by Reuters.
This follows last year’s decision by the government and the SARB to lower the inflation target to 3%, with a one-percentage-point tolerance band, marking the first revision in 25 years.
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The target was initially expected to be met by 2027.
Kganyago explained that inflation across major categories has remained within manageable levels, reinforcing confidence that the new benchmark can be achieved by 2026.
He added that the SARB’s key lending rate currently stands at 6.75%, with scope under the bank’s projection model for up to two additional 25-basis-point rate cuts this year.
The Monetary Policy Committee is scheduled to hold its first meeting of the year next week.
The inflation outlook has coincided with a strong rally in the South African rand, which has recorded its best weekly performance in more than two decades.
The currency has been supported by rising precious metal prices and signs of gradual economic improvement.
Investor sentiment has also been strengthened by the adoption of a lower inflation target, reinforcing expectations that South Africa will maintain a favourable interest rate differential relative to the United States.
With inflation projected around 3.6% and the policy rate at 6.75%, the country’s real interest rate remains above 3%, making the rand attractive to yield-seeking investors.
Analysts at Bloomberg Economics note that upcoming inflation data could further confirm that price pressures have peaked, adding to optimism around South Africa’s macroeconomic outlook.
