The SARB raises its policy rate to 7.25% as fuel prices climb again
Victoria Shinder2 min readThe South African Reserve Bank's Monetary Policy Committee raised its policy rate by 25 basis points to 7.25% on 23 September, effective from 25 September. The decision was unanimous. Governor Lesetja Kganyago's statement frames it as a response to a supply shock that had seemed to be fading a few months ago and has instead intensified.
The external picture in the statement is stark. It describes little oil moving through the Strait of Hormuz, Saudi exports disrupted by fighting in Yemen, and continued damage to refinery capacity from the Russia-Ukraine war, adding up to what it calls a large, negative and persistent global supply shock. More central banks are raising rates, the statement notes, naming the ECB, the Bank of Japan and the Federal Reserve, which it says hiked the previous week for the first time in three years. Longer-term rates have risen too, driven by large fiscal deficits, inflation risk and heavy borrowing to fund AI infrastructure.
At home, the economy contracted by 0.2% in the second quarter, and the Bank now projects 1.2% growth for the year, down from 1.4%. Headline inflation is expected to exceed 5% late this year and early next before returning towards the 3% target by the end of 2027. The mix matters: petrol prices are rising again, with an under-recovery of about R2.83 a litre, while food inflation is at its lowest since 2010 and the rand has held up well. Services inflation is elevated, and survey-based inflation expectations, around 4% at longer horizons, remain above target.
What it means
The notable choice is to tighten into a contraction. The MPC says its approach is to look through the first-round effects of price shocks but not to let them entrench, and that a large and sustained shock makes second-round effects more likely. Its model now shows the policy rate broadly stable for the rest of the year, with cuts later as inflation falls; the two risk scenarios it published - higher global rates and higher wage and expectation dynamics - both imply a tighter path than the baseline.
The statement also makes a point about the currency. It argues that South Africa's macro fundamentals - sustainable debt and permanently lower inflation - are becoming a differentiating factor, lowering country risk and protecting it from the global bond selloff. For readers watching the rand, that is the Bank's own case for why its credibility should support the currency, set out in its own words rather than as a market call.