South Africa’s central bank has maintained its key interest rate at 7%, a decision announced by the South African Reserve Bank’s Monetary Policy Committee (MPC) on Thursday. This move came as policymakers assessed persistent inflation risks and uncertainties surrounding oil prices and the Middle East conflict.

The decision surprised most economists who had anticipated another 25-basis-point rate hike. The rand subsequently weakened as markets adjusted to the unchanged monetary policy stance.

The MPC stated that its current policy stance remained appropriate for now, although members were divided on whether to raise rates further. Four members preferred a hold, while two favoured an increase of 25 basis points.

The committee agreed that the outlook is uncertain, noting that with the rate increase at their previous meeting in May, the policy stance is appropriate and somewhat restrictive. The MPC highlighted that the outlook remains highly dependent on the evolution of inflation expectations and oil prices.

The central bank assessed different scenarios for inflation and monetary policy. An adverse scenario projected inflation persistently above target, with shocks feeding into food prices and core inflation, requiring an extra hike this year and an extended period of restrictive policy.

Under this adverse scenario, oil prices were assumed to rise to $100 per barrel in 2026 before gradually easing to $80 by 2029. Conversely, a favourable scenario showed inflation returning to target more rapidly, implying that rates could begin easing in the current year, with oil prices at $78 per barrel in 2026, falling to $60 by 2029.

The decision follows a rise in South Africa’s annual consumer inflation to 5.0% in June 2026, up from 4.5% in May. This increase has added to the uncertainty facing the South African Reserve Bank as it balances price containment with concerns over economic activity.

This cautious approach by South Africa’s central bank aligns with other African central banks. The Central Bank of Nigeria retained its Monetary Policy Rate at 26.5% at its 306th meeting on July 20 and 21, 2026. Similarly, the Bank of Ghana maintained its benchmark interest rate at 14% amid inflation risks linked to geopolitical tensions.