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South Africa’s Central Bank governor, Lesetja Kganyago, has said the country could meet its revised 3% inflation target in 2026, citing broadly stable price trends and improving inflation dynamics.
Speaking ahead of the release of 2025 inflation data, Kganyago said the South African Reserve Bank expects headline inflation for the year to fall within a range of about 3.2% to 3.4%.
The government and central bank lowered the inflation target to 3% last year, with a tolerance band of one percentage point, marking the first adjustment in 25 years. The target had previously been expected to be reached only by 2027.
Kganyago said inflation across major categories was showing consistent moderation, reinforcing confidence that the new target could be achieved this year.
The central bank’s benchmark lending rate is currently 6.75%. Kganyago noted that the bank’s projection model allows scope for as many as two additional quarter-point interest rate cuts this year.
Meanwhile, the Monetary Policy Committee is scheduled to hold its first meeting of the year next week.
Market sentiment has improved in recent weeks, with the rand recording its strongest weekly gains in more than two decades, supported by higher precious metal prices and signs of a gradually strengthening economic outlook.
Investor confidence has also been aided by cautious monetary policy and government efforts to revive growth in Africa’s most industrialised economy, which has averaged below 1% annual growth over the past decade.
Analysts say the adoption of a lower inflation target has strengthened expectations that South Africa will maintain an interest rate premium over the United States.
Bloomberg Economics has also noted that upcoming inflation figures could confirm that price pressures have already peaked.
With inflation projected around 3.6% and the policy rate at 6.75%, South Africa’s real interest rate remains above 3%, keeping the rand attractive to yield-focused investors.
