PRESS STATEMENT
EMBARGO DELIVERY
20 November 2025

STATEMENT OF THE MONETARY POLICY COMMITTEE

Issued by Lesetja Kganyago, Governor of the South African Reserve Bank
Good day
It has been a turbulent year for the global economy. Trade patterns are shifting, but
global growth is holding up better than expected.1 In the euro area, inflation appears
contained. However, in other major economies price dynamics are more challenging,
with deflation risk in China, and inflation materially above 2% targets in the United
Kingdom, Japan, and the United States (US). In emerging markets (EM), by contrast,
inflation has eased. Indeed, 2025 has been better than expected for EMs. This is
due to stronger capital flows and a weaker dollar, as well as favourable terms of
trade.
Meanwhile, there is an investment boom underway in Artificial Intelligence (AI)
infrastructure, accompanied by aggressive valuations for major technology stocks.
Despite the promise of AI, there are signs of a bubble inflating. With lower rates, and
cheap credit even for riskier borrowers, financial markets appear vulnerable to a
correction. If that happens, emerging markets could suffer from spillovers.
Turning to South Africa, growth is looking steadier than last year. The second-quarter
outcome surprised on the upside and the third-quarter indicators are looking broadly
positive. Our 2025 growth forecast has therefore been revised slightly higher, to

1 The SARB’s growth projection for South Africa’s major trading partners has been marked up to
2.7%, from 2.5% as of the September MPC.

1.3%. We continue to see growth nearing 2% over the forecast horizon.2
Employment has also been rising.3
Household spending has been relatively strong to date, supported by wealth effects,4
further withdrawals from Two-Pot pension savings, and lower inflation and interest
rates.5 At the same time, investment has disappointed, contracting further in the first
half of the year. We expect an investment recovery in the second half, and if this
materialises it will be an encouraging signal that the economy is getting back to its
historic growth trend.6 As it stands, growth is better, but not yet healthy.
The risks to the growth outlook are assessed as balanced.
Moving to prices, inflation has accelerated somewhat over the past few months,
reaching 3.6% for October. This is higher than the 3% average for the first half of the
year.7 The uptick is mainly due to non-core items: meat, vegetables, and fuel. We
continue to see this pressure as temporary, with inflation heading lower again from
the beginning of next year. Indeed, recent outcomes have undershot our forecasts
slightly.
Because of these downside surprises, together with a stronger rand,8 and a lower oil
price assumption,9 we have small downward revisions to our inflation outlook, for
both 2025 and 2026.10 We remain on track to deliver 3% inflation over the medium
term.

2 The 2025Q3 growth forecast has been revised up to 0.5% (q/q sa), from 0.4%. 2025Q4 has also
been revised up, to 0.4%, from 0.3%.
3 According to the Quarterly Labour Force Survey, total employment rose to 17.055 million in
September 2025, which contrasts with 16.946 million in September 2024 (one year ago) and 16.807
million in June 2025 (one quarter ago). The official unemployment rate also eased, to 31.9% (versus
32.1% a year ago and 33.2% one quarter ago).
4 This reflects strong asset price performance; for instance, the year-to-date change for the JSE AllShare Index is ±30%.
5 Household consumption growth is projected at 2.7% for 2025, approximately double the growth rate
of overall GDP (1.3%).
6 In the MPC’s modelling framework, steady-state growth is 2.5%.
7 Average headline CPI inflation was 2.95% between January 2025 and June 2025. It was 3.5% in
July, 3.3% in August and 3.4% in September.
8 The implied starting point for the forecast is 17.21, for 2025Q4; the assumption for that quarter as of
the September MPC was 17.61. The 2026Q1 projection is 17.25.
9 The oil price assumption has been lowered to US$63.10 per barrel for 2025Q4 and US$67 per
barrel subsequently. The September MPC had US$67 for 2025Q4 and US$70 subsequently. Fuel
inflation for 2025 drops from -5.5% to -5.9%; for 2026 it slows from 3.8% to 2.2%.
10 Annual inflation for 2025 has been revised from 3.4% to 3.3%, and 2026 from 3.6% to 3.5%.
Inflation for 2027 is unchanged at 3.1%.

For inflation expectations, we do not have an update from our usual survey this
meeting, but market rates and surveys of analysts both show further progress
towards the 3% objective.11 Core goods prices are benefitting from exchange rate
strength. Food price inflation seems to have peaked, although we have a small
upward revision to this forecast, mainly from beef prices. Services inflation is
unchanged from the last meeting: the announced medical aid increases are lower
than last year’s;12 at the same time, housing inflation has accelerated, which
warrants ongoing scrutiny.
We assess the risks to the inflation outlook as balanced.
Against this backdrop, the MPC decided to reduce the policy rate by 25 basis points,
to 6.75%, with effect from 21 November. The decision was unanimous. Members
agreed there was scope now to make the policy stance less restrictive, in the context
of an improved inflation outlook.
The Quarterly Projection Model continues to forecast gradual rate cuts as inflation
subsides. As before, this rate path remains a broad policy guide. Our decisions will
continue to be taken on a meeting-by-meeting basis, with careful attention to the
outlook, data outcomes, and the balance of risks to the forecast.
For this meeting, we considered two risk scenarios.
The first scenario featured a US dollar rebound, recognising that while the rand has
appreciated this year, this partly reflects broad dollar weakness, not just rand
strength.13 In this scenario, the rand depreciates back to its 2023 levels against the
dollar, rather than holding on to its recent gains, as in our baseline.14

11 Since the September MPC, breakeven rates have declined across the curve. As of the start of this
MPC week, the 5-year measure was down by the smallest margin (2bps). The 10-year was down by
22bps; the 15-year by 51bps, and the 20-year by 59bps. In the latest Reuters poll, analysts have
inflation at 3.6% for 2026 (versus 3.8% previously) and 3.4% for 2027 (versus 3.5% previously).
12 The average of the published increases announced by the various medical aid schemes, for 2026,
is 8.1%.
13 For instance, while the rand has appreciated by about 9% against the US dollar so far this year, it
has depreciated by around 2% against the euro.
14 In this scenario, the local currency weakens to about R19 per US dollar over the forecast period. In
the baseline, the rand is stable close to R17 per US dollar.

The second scenario was based on higher administered prices, linked to a rapid
correction of the R54 billion electricity pricing error disclosed a few months back.15
The scenario also had inflation expectations staying higher for longer, in response.
Both scenarios featured tighter monetary policy, with rates coming down more slowly
compared to the baseline.16 The administered price scenario in particular shows that
if price setters take on board the 3% target, we will have space to get to lower rates
faster.
This brings us to the subject of the new target. As announced last week, we have
moved away from the 3-6% target range, which was established 25 years ago. The
revised target, agreed between the Minister of Finance and myself as the Governor
of the South African Reserve Bank, is 3% plus or minus 1 percentage point.
As we move from a range target to a point target with a tolerance band, it is
important to understand what the new target means.
The tolerance band, of 1 percentage point either side of 3%, does not mean we will
be indifferent to inflation anywhere between 2% and 4%. We want to be at 3%.
However, no central bank has the tools to deliver inflation at an exact point all the
time. As flexible inflation targeters, we also recognise that trying to offset all price
shocks would create undesirable volatility in output.
To support communication and accountability, we therefore want it understood that
inflation will not always be precisely 3%.
When there are deviations, we will explain what has driven inflation away from
target, and we will do what is required to get back to target.

15 The scenario had admin. price inflation of 5.0% in 2026, 5.1% in 2027 and 4.0% in 2028 (baseline:
4.5% for 2026, 4.3% for 2027 and 3.9% for 2028), with electricity inflation at 10.6% in 2026, 9.5% in
2027 and 6.7% in 2028 (baseline: 9.1%, 7.9% and 6.9%, respectively). The scenario assumed the
NERSA correction was frontloaded, which is why 2028 inflation is not higher.
16 In the dollar scenario, inflation is 3.6% in 2026, 3.4% in 2027 and 3.4% in 2028. In the admin. price
scenario, inflation is 3.6%, 3.5% and 3.2% in those three years, respectively. The corresponding
inflation projections in the baseline are 3.5%, 3.1% and 3.0%, respectively. In the admin. price
scenario, the divergence is largest in mid-2027, when the policy rate is 6.44% (2027Q2) and 6.41%
(2027Q3), versus a baseline policy rate of 6.05% and 6.03% for those two quarters, respectively. For
the dollar scenario, the divergence is largest in 2028Q1, when the policy rate is at 6.58%, versus a
baseline rate of 5.97%.

Most of the time, we should be expected to keep inflation within the tolerance band,
with breaches occurring only when there are severe shocks. We will always be
setting policy so that inflation is going back to 3%.
Monetary policy actions have their main effects on prices after 12 to 24 months, so
you should expect us to achieve our target over that horizon. Accordingly, we want
longer-run expectations to anchor at 3%, staying there even when there are shocks.
This lag, between monetary policy decisions and outcomes, also explains why the
3% target is taking effect now, but will be achieved over the forecast period.
The MPC has long emphasised the need for macroeconomic and structural reforms
to boost potential growth, achieve a sustainable debt path, and shift to a low-inflation
regime. There has been significant progress on reform this year, as underscored by
the recent credit rating upgrade from Standard & Poor’s, as well as South Africa’s
exit from the Financial Action Task Force grey list. The global environment
nonetheless remains challenging, so it is urgent to sustain domestic reform efforts.
Thank you.
Lesetja Kganyago
GOVERNOR

The dates for the 2026 MPC decisions are as follows:
29 January
26 March
28 May
23 July
23 September
19 November

Contact person:
Thoraya Pandy
082.416.8416