The South African Reserve Bank (Sarb) should hold the repurchase (repo) rate unchanged this week to protect economic stability and support the property market, according to Seeff Property Group chairman Samuel Seeff.
This comes as the Sarb's Monetary Policy Committee (MPC) will make its decision on interest rates in the country on Wendesday, 23 September 2026.
Seeff has renewed his call for the MPC to resist another rate increase, arguing that higher borrowing costs would place additional pressure on households and property owners at a time when the economy is already facing subdued growth and rising living costs.
The call comes as expectations of a 25-basis-point (bps) rate increase have strengthened following higher global oil prices, rising inflation risks and recent monetary policy tightening by several major central banks.
However, Seeff said South Africa needed stability rather than another increase in borrowing costs.
He said the current inflationary pressures were largely being driven by external supply factors and that increasing interest rates would not address the underlying causes of higher oil and energy prices.
Seeff said, "the current environment requires the Reserve Bank to look beyond short-term cost pressures and consider the broader effect of monetary policy on economic activity. Stability is now vital for the economy and property market.”
He argued that the current oil price pressures and inflation spike remained temporary global supply side factors, although they had taken longer to ease than initially expected.
“An increase in interest rates under these circumstances would fail to address external cost pressures while placing unnecessary financial strain on already constrained consumers and property owners,” Seeff said.
"A further increase following the 25bps hike implemented in May could also weaken the economic recovery," he said.
Property market faces another test
South Africa’s economic growth outlook has already been downgraded from an initial projection of 1.4% at the beginning of the year to about 1.1%.
Seeff warned that higher borrowing costs could further suppress consumer spending and economic activity, with the property market likely to feel the effects through weaker affordability and reduced demand.
The property sector remains particularly sensitive to interest rate movements because higher rates directly affect the cost of servicing home loans.
For existing homeowners, another increase would place further pressure on household budgets already dealing with higher food, fuel and other living costs.
For prospective buyers, particularly first-time buyers, higher home loan repayments could push properties further out of reach.
Seeff said a rate increase could also raise the risk of home loan defaults and weigh on confidence among property investors.
“The economy and property market require a stable interest rate environment to maintain confidence and activity,” he said.
Holding the repo rate will provide greater certainty for households, businesses and property investors, while helping to protect jobs and support longer term economic growth, said Seeff.
Economists divided on rate decision
The case for a hold is not without opposition, however, with economists warning that higher oil prices could result in inflation remaining elevated for longer.
Johann Els, Chief Economist at PSG Financial Services, expects the Reserve Bank’s decision to be extremely close and potentially split.
Els said there were arguments for both a rate increase and a hold, but he remained cautious about expecting a hike.
“It will be a very close call, and I expect a split decision. However, it would be an oversimplification to simply expect a rate hike. A rate hike is not a done deal,” Els said.
Higher oil prices remain one of the strongest arguments for tighter monetary policy. Els expects further petrol price increases from October and said oil prices were now materially higher than they were before the July MPC meeting.
He expects August headline inflation to rise from July’s 4.3% level to between 4.5% and 4.6%, with inflation potentially moving above 5 percent in October and November.
However, Els said the August inflation figure, due shortly before the MPC announcement, was unlikely to have a major influence on this week’s decision because the Reserve Bank’s forecasting work would largely have been completed before the data was released.
The case for keeping rates unchanged
Els said several factors supported a hold.
"The rand has remained relatively stable despite significant global uncertainty, while real interest rates remain restrictive. Inflation expectations also declined in the third quarter, particularly among households and trade unions. More importantly, the Reserve Bank already increased the repo rate by 25bps in May," Els said.
“The question now is whether it makes sense to hike again so soon, before we have seen the full impact of that May hike working through the economy, especially since inflation expectations actually eased in the third quarter,” Els said.
He said the Reserve Bank had deliberately moved early with the May increase rather than waiting for inflation pressures to become more entrenched.
Els also noted that wage settlements remained unchanged in the second quarter and that there had not yet been clear evidence of second round inflation effects from previous petrol price increases.
Higher transport costs had affected areas such as airline fares, taxi fares and bus fares, but had not yet translated into broad based price increases across the economy, he said.
There was also limited reason for the Reserve Bank to respond simply because other central banks had increased rates, according to Els.
He said the impact on the rand from a difference in monetary policy between South Africa and other economies was likely to be limited in the current circumstances.
Property needs certainty
For the property market, the distinction is important.
A temporary inflation shock driven by global oil prices cannot necessarily be addressed through higher domestic borrowing costs. A rate increase, however, would have an immediate effect on households servicing mortgages and buyers trying to secure home loans.
Seeff said this was precisely why the Reserve Bank should prioritise stability at the current meeting.
“Holding the repo rate at current levels will provide much needed certainty for businesses and property investors, helping to safeguard existing jobs and foster sustainable long term economic growth,” Seeff said.
ashley.lechman@nationalmg.co.za