{"id":854699,"date":"2026-03-24T07:00:00","date_gmt":"2026-03-24T05:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=854699"},"modified":"2026-03-24T07:06:15","modified_gmt":"2026-03-24T05:06:15","slug":"from-bad-to-much-worse-for-interest-rates-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/854699\/from-bad-to-much-worse-for-interest-rates-in-south-africa\/","title":{"rendered":"From bad to much worse for interest rates in South Africa"},"content":{"rendered":"\n

Not only are interest rate cuts in South Africa increasingly unlikely, but the market is now also predicting a significant rate increase.<\/p>\n\n\n\n

The outlook on inflation has taken a dramatic turn following the United States and Israel’s attacks on Iran, which resulted in retaliatory strikes from the Middle Eastern nation and the closure of the Strait of Hormuz.<\/p>\n\n\n\n

Markets had previously seen between two and four rate cuts from the South African Reserve Bank (SARB) over the next 18 months, with inflation seen as being under control. <\/p>\n\n\n\n

However, the three-month forward rate beginning a year from now has moved from pricing in three cuts to pricing in four hikes<\/strong>.<\/p>\n\n\n\n

The Middle East conflict, however, has seen the price of Brent Crude oil climb by around 90% since the start of the year, while the rand has weakened to around R17.20 to the dollar. <\/p>\n\n\n\n

“Price is not the only concern: if the crisis persists, domestic fuel availability could also become a problem,” said Ashburton Investments Head of Fixed Income Albert Botha. <\/p>\n\n\n\n

“South Africa’s strategic petroleum reserves currently stand at 7.7\u20138 million barrels, far below its 45-million-barrel capacity, having never recovered from the 2016 reserve sales that the High Court later ruled to be corruption.” <\/p>\n\n\n\n

This vulnerability is compounded by a sharp decline in domestic refining capacity, which has declined by around 50% since 2010. <\/p>\n\n\n\n

This makes South Africa more dependent on refined fuel imports and less able to absorb shocks to supply and shipping. <\/p>\n\n\n\n

On top of this, local cost pressures will be exacerbated by large electricity price increases, with NERSA approving increases of 8.76% for direct customers and 9.01% for municipalities. <\/p>\n\n\n\n

In terms of labour, Eskom workers are seeking a 12% wage increase, while the minimum wage has increased by 5% from 1 March.<\/p>\n\n\n\n

Nevertheless, food and fuel are the largest near-term drivers of inflation. South Africa imports over 80% of its fertiliser, making it highly exposed to global price disruptions. <\/p>\n\n\n\n

The growth outlook in South Africa has also weakened, with gold down 20% from its peak, tourism likely to soften as airfares rise, and key hub routes face disruption. <\/p>\n\n\n\n

Agricultural output will also face pressure from higher energy and fertiliser costs. These effects have significantly affected the outlook for interest rates.<\/p>\n\n\n\n

The three-month forward rate beginning a year from now has moved from pricing in three cuts at around 6.07% to pricing in four hikes at 7.90%. <\/p>\n\n\n\n

Botha said this marks a 183-basis-point shift since 17 February, and paints a worrying picture for the path of interest rates in South Africa. <\/p>\n\n\n\n

Wait and see<\/h2>\n\n\n
\n
\"\"<\/a>
The Reserve Bank’s Monetary Policy Committee<\/figcaption><\/figure><\/div>\n\n\n

These developments make the job of the Monetary Policy Committee (MPC) far tougher, with its next interest rate decision due this Thursday, 26 March. <\/p>\n\n\n\n

Botha said a few decisions remain likely.<\/p>\n\n\n\n

“First, the near-term inflation forecast will be revised upward, even as the projection for end-2027 is likely to remain close to the 3% target,” he said. <\/p>\n\n\n\n

“Second, growth expectations will be lowered, weighed down by energy and fertiliser costs and by broader economic uncertainty.”<\/p>\n\n\n\n

Finally, the policy rate will likely remain unchanged at 6.75% this week, even if the crisis unwinds as quickly as it escalated, as most central banks are in a wait-and-see mode. <\/p>\n\n\n\n

Inflation is currently around the new 3% target, but Botha said the MPC has been conservative in recent meetings, and a pause now would buy more time.<\/p>\n\n\n\n

“Uncertainty is the defining condition of our outlook, a hallmark of the second Trump term, and South Africa must, unfortunately, watch and absorb the consequences of events unfolding in the Middle East.” <\/p>\n","protected":false},"excerpt":{"rendered":"

South Africa’s hopes of interest rate cuts this year have been dealt a serious blow, with growing uncertainty due to the war in the Middle East. <\/p>\n","protected":false},"author":95,"featured_media":785195,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[11483,3619],"class_list":["post-854699","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-ashburton-investments","tag-sarb"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/854699","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=854699"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/854699\/revisions"}],"predecessor-version":[{"id":854712,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/854699\/revisions\/854712"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/785195"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=854699"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=854699"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=854699"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}