By Lehlohonolo Lehana.
The South African Reserve Bank (SARB) has released the October 2026 Monetary Policy Review (MPR), which gives a more detailed look into the local and international economic developments shaping domestic monetary policy.
Governor Lesetja Kganyago delivered the opening remarks and followed by a presentation by SARB Chief Economist, Konstantin Makrelov.
The MPR’s release comes as inflation remains above target, and as ongoing conflicts in the Middle East and attacks on energy infrastructure in the Russia-Ukraine war threaten to keep fuel prices high even after geopolitical tensions subside.
Other risks highlighted in this edition include possible food price increases brought on by El Nino, rising inflation expectations, as well as a potential depreciation in the value of the rand due to policy tightening in advanced economies.
The SARB said it only expects inflation to fall back to its 3% target in the fourth quarter of 2027 while remaining well above its 1 percentage point tolerance band for the rest of the year.
Inflation was 4.4% in August, the latest data (MPC) has raised rates by a cumulative 50 basis points between April and October this year, with the last hike in September.
The bank said it now expects the real policy rate to remain restrictive before converging to neutral from the second half of 2028.
An analysis by the SARB showed that the risk of second-round effects, meaning more generalised inflation with rising wages and prices, had increased as the shock persists.
“Policy must guard against the risk that persistent fuel, administered price and food shocks become embedded in expectations and wages, thereby undermining the credibility of the target,” it said.
Turning to economic activity, growth is forecast to average 1.2% in 2026, from 1.4% in April, rising gradually towards 2% by 2029 as structural reforms progress.
Read the full MPR here: Monetary Policy Review.
Watch Live in the video below:
ideo Courtesy of SARB.