Reserve Bank Governor shares good news about inflation and interest rates in South Africa

South African Reserve Bank Governor Lesetja Kganyago has delivered encouraging news about the country’s inflation outlook, saying the central bank’s current monetary policy should bring inflation back to its 3% target once temporary global price shocks begin to fade.

His comments offer some hope for South African consumers and businesses after rising fuel and energy costs put renewed pressure on inflation and forced the Reserve Bank to increase interest rates.

Speaking to the Italian South African Chamber of Trade and Industries, Kganyago said the bank’s economic models indicated that its current policy settings were sufficient to bring inflation back to target once the initial shocks had passed.

“So far, our modelling indicates that prevailing policy settings are sufficient to return inflation to target after the initial shock has passed,” he said.

He added that the Reserve Bank remained committed to preventing temporary price increases from becoming permanently embedded in the economy.

South Africa has been working towards a new inflation target of 3%, which is lower than the previous target range of 3% to 6%.

However, the economic environment has become more difficult following rising global energy and fertiliser prices.

The conflict in the Middle East, alongside the war in Ukraine, has contributed to higher commodity prices and renewed pressure on global supply chains.

South Africa is particularly vulnerable to these developments because higher international oil prices feed into local petrol and diesel costs.

Inflation accelerated to 4.5% in September 2026, remaining above the Reserve Bank’s 3% target.

The central bank has warned that these pressures could persist before gradually easing.

The inflation outlook has also influenced the Reserve Bank’s decisions on interest rates.

In September 2026, the Monetary Policy Committee unanimously increased the repo rate by 25 basis points to 7.25%.

This pushed the prime lending rate to 10.75%, increasing borrowing costs for households and businesses.

The decision was made as policymakers became increasingly concerned that higher fuel and energy prices could feed into broader inflation.

However, Kganyago’s latest comments suggest that the Reserve Bank believes its existing policy approach can bring inflation under control without necessarily requiring further aggressive increases.

This is potentially encouraging news for homeowners, vehicle finance customers and businesses carrying debt.

The next interest rate announcement is scheduled for 19 November 2026.

Kganyago also highlighted several improvements in South Africa’s economic environment.

These include better electricity supply, progress in logistics reforms and improvements in the government’s fiscal position.

He said several foundations of the economy were stronger than they had been a few years earlier.

Finance Minister Enoch Godongwana also announced positive developments in his October medium-term budget.

Government debt as a percentage of GDP is expected to have peaked and should begin declining during the current financial year.

Revenue collections are also expected to outperform previous estimates, while the budget deficit is forecast to be smaller than initially projected.

Kganyago said these developments should support confidence, investment and economic growth.

The Reserve Bank Governor’s comments provide some encouragement for consumers who have been dealing with higher living costs and borrowing expenses.

If inflation gradually returns to the 3% target, it could create more favourable conditions for future interest rate reductions.

However, this is not a guarantee that interest rates will fall at the next Monetary Policy Committee meeting.

The Reserve Bank will continue monitoring fuel prices, global developments, inflation expectations and the broader economic outlook before making its decisions.

For now, the message from Kganyago is that the current monetary policy approach is expected to bring inflation under control once temporary global shocks subside.

For millions of South Africans paying home loans, vehicle finance and other debts, a sustained decline in inflation could eventually provide much needed financial relief.

Sources: Reserve Bank Governor shares good news about inflation and interest rates – Daily Investor

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