Steady domestic growth offers shield against global volatility, says Reserve Bank Governor

Reserve Bank Governor Lesetja Kganyago says the central bank remains cautiously optimistic about the outlook for 2026, as the central bank weighs its policy options for the year.

This follows a decision by the central bank’s Monetary Policy Committee (MPC) to hold the benchmark policy rate at 6.75% on Thursday's announcement.

The MPC already lowered the repo rate from 8.25% at the start of 2024 to 6.75% by the end of 2025.

Last year was marked by extreme global uncertainty, and 2026 has begun with a new round of shocks.

Geopolitical tensions remain elevated, reflecting what the Reserve Bank has labelled a rupture in the global political order.

Reserve Bank governor Lesetja Kganyago says markets are jittery and precious metals like gold have received safe-haven flows, while there are also ongoing risks of an artificial intelligence bubble.

“Global imbalances have become very large. For instance, China’s trade surplus was over a trillion dollars last year, a new record. Meanwhile, government debt is still growing fast in key economies, with the US fiscal deficit, for example, approaching two trillion dollars. These trends are not sustainable.”

He says South African growth looks steadier with the economy expanding four consecutive quarters and on track to mark the longest unbroken growth phase since 2018.

“Despite a volatile global backdrop, there was significant progress on domestic reforms, including a new inflation target. These efforts have been rewarded with lower borrowing costs, a rapid decline in inflation expectations, and steadier growth.”

Kganyago says further gains in economic performance would come from reaching a prudent public debt level, lowering administered price inflation, and continuing structural reforms that raise potential growth.