Africa-Press – South-Africa. Standard Bank, South Africa’s largest bank by assets under management, believes that the country will see more interest rate cuts in 2026.
Standard Bank noted that South Africa has entered a new chapter in monetary policy, with Finance Minister Enoch Godongwana setting a 3% inflation target.
While the South African Reserve Bank (SARB) uses monetary policy to achieve the inflation target, it is the government that sets the inflation target.
The SARB is basing its inflation figures on the new target, but Standard Bank said that the move is more than just a change to a headline number.
“With a one percentage point tolerance band, the new framework aims to anchor lower inflation expectations across the economy,” it said.
“That is good news for businesses planning capital investments and for households managing monthly budgets.”
Lower food and energy costs should also support the lower-inflation backdrop through 2026, as lower inflation also means a better real return on investment.
With inflation already tracking closer to its new target, monetary policy is expected to see further interest rate cuts.
Following the 100 basis point cuts to interest rates in 2025, the SARB is expected to deliver another 50 basis points of relief in 2026, provided inflation remains well-behaved.
“This sustained easing cycle creates a more favourable backdrop for wealth building,” it said.
“Lower borrowing costs reduce the expense of credit, while shifts in relative valuations across bonds, property, and other rate-sensitive assets open up tactical opportunities for portfolio positioning.”
The SARB itself anticipates a further 75 basis points decline in the repo rate over the next 15 months, with the repo rate expected to stand at 6.0% by March 2027.
With the prime lending rate currently standing at 10.25%, this could drop to 9.5% if the SARB’s expectations are met.
A better year for the economy
Looking elsewhere, South Africa’s economic expansion is expected to gain traction in 2026, with the South African Reserve Bank (SARB) forecasting 1.4% growth, a slight increase from 2025’s 1.2%.
“The foundations for this acceleration are becoming clearer: more reliable electricity availability and enhanced logistics infrastructure are enabling businesses to scale production with greater confidence,” said Standard Bank.
The global environment also remains supportive, with major trading partners expected to deliver solid performances.
According to the IMF, the United States is projected to grow at 2.1%, China at 4.2%, and the Euro area at 1.1%.
Standard Bank said that these markets represent critical destinations for South African goods, even if US-based tariffs remain a consideration for exporters.
The rand’s strength was one of 2025’s notable developments, with the currency gaining against the US dollar over the year, which helped to lower the cost of imported goods.
The primary driver of the decline was broad dollar weakness, stemming from concerns about the nation’s tariff policies, as well as high commodity prices resulting from geopolitical tensions, which put pressure on the dollar.
There is also a market consensus that the rand will maintain stability around the R17/$ level in 2025; however, Standard Bank has warned that currency movements remain inherently unpredictable.
South Africa’s stocks also had a standout year in 2025, with the JSE all share up by nearly 40% in 2025. Gold and platinum mining companies were mainly responsible for the lift.
Gold miners were helped by gold prices pushing above $4,000 an ounce as investors sought safety in a volatile world.
Standard Bank said the forces behind safe-haven demand, including trade tensions, conflict in the Middle East and the war in Ukraine, also don’t appear to be fading, which should support precious metals.
Improved governance under the Government of National Unity has also lifted confidence in the reform agenda.
The municipal elections scheduled for late 2026 could add another catalyst if they deliver improvements in service delivery and signal policy continuity.
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