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02 June 2026 2 min

SARB Revises Inflation Forecasts Upward and Rules Out Return to 3–6% Band

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SARB Revises Inflation Forecasts Upward and Rules Out Return to 3–6% Band
  • The South African Reserve Bank raised its key repo rate by 25 basis points last Thursday, to 7%, with four out of six Monetary Policy Committee members backing the decision.
  • South Africa's inflation climbed to 4% in April from 3.1% in March, sitting at the upper end of the central bank's target range.
  • The Sarb, which targets inflation at 3% with a 1-percentage-point tolerance band, raised its inflation forecasts to 4.4% and 3.7% for 2026 and 2027 respectively.
  • Africa's most industrialised economy is a net oil importer and has seen large price hikes on the back of the Iran war, which has pushed inflation higher, despite a modest government intervention on the fuel levy to cushion the full effect of the price increases.
  • The governor said second-round effects from the oil shock -including spillovers to food prices from higher diesel and fertiliser costs - were developing and needed to be tackled. The bank is projecting core inflation of around 4% in the first half of next year.
  • Kganyago warned that inflation expectations could quickly edge higher as price setters have a fresh memory of elevated inflation, adding that raising rates now was a move to counter that risk.
  • "By changing rates, we hope to send a clear and credible signal that we will keep inflation under control," Kganyago said in a speech to economists in Johannesburg, warning that the bank would not allow a price spiral to take hold at the expense of the most vulnerable.
  • Kganyago firmly ruled out reverting to the old 3–6% inflation target band.
  • The next inflation expectation survey will be released at the end of June.
Total Words: 282
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