The South African Reserve Bank (SARB) has held the repo rate at 7.00% on the back of South Africa’s weak economic growth but acknowledged that inflationary risks remain, meaning that the door for a 25-basis-point hike in 2026 remains.

Four members of the SARB’s Monetary Policy Committee voted to keep rates unchanged while the remaining two members favoured a 25-basis-point increase.

The decision leaves the prime lending rate unchanged at 10.50%, providing some relief to households and businesses already under pressure from weak confidence, higher fuel costs, and slowing economic activity.

The close vote nevertheless shows that the possibility of another increase remains. The central bank’s governor, Lesetja Kganyago, said that inflation is still too high and warned that underlying price pressures and inflation expectations have risen.

Annual consumer inflation rose to 5.0% in June from 4.5% in May, driven mainly by higher fuel costs. The SARB expects headline inflation to remain above 4.0% until early next year, higher than its inflation target of 3.0%.

The central bank flagged that renewed elevated oil prices remain a risk. The price of oil fell to about $70 a barrel earlier in July before rebounding to nearly $100 on the back of renewed hostilities in the Middle East.

The SARB expects data to show economic growth had slowed in the second quarter and it expected growth to continue to slow in the third quarter, as falling consumer and business confidence, weaker commodity prices, and uncertainty surrounding the Middle East conflict weigh on economic activity. The SARB also identified municipal dysfunction as an increasingly binding constraint on South Africa’s growth.

The hold gives borrowers breathing room, but it does not mark the end of the SARB’s hiking cycle. A sustained rise in oil prices or a further rise in inflation expectations could make another rate hike more likely before the end of the year.