{"id":858041,"date":"2026-04-22T14:30:00","date_gmt":"2026-04-22T12:30:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=858041"},"modified":"2026-04-22T14:31:32","modified_gmt":"2026-04-22T12:31:32","slug":"the-one-thing-that-could-stop-interest-rate-hikes-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/banking\/858041\/the-one-thing-that-could-stop-interest-rate-hikes-in-south-africa\/","title":{"rendered":"The one thing that could stop interest rate hikes in South Africa"},"content":{"rendered":"\n

The South African Reserve Bank (SARB) may not increase interest rates in South Africa if the war in Iran is short-lived. <\/p>\n\n\n\n

The SARB was widely expected to cut interest rates by a cumulative 50 basis points at the start of 2026. However, the war in Iran changed that perspective. <\/p>\n\n\n\n

However, following the US and Israel’s attacks on Iran in March, the decision now rests on whether the SARB will keep the repo rate on hold at 6.75% or increase it. <\/p>\n\n\n\n

The war comes at just the wrong time, with inflation in South Africa near or at the Reserve Bank’s new target of 3.0%. <\/p>\n\n\n\n

The latest CPI print for March 2026 came in at 3.1%, a slight increase from the 3.0% figure in February. <\/p>\n\n\n\n

Despite the slight increase, it still falls well within the SARB’s tolerance band, which allows for swings of 1 percentage point either way. <\/p>\n\n\n\n

However, Dr Elna Moolman, Standard Bank Group Head of South Africa Macroeconomic Research, said that the data does not reflect the full inflationary impact of the Iran war. <\/p>\n\n\n\n

The war led to a massive rise in fuel prices as global oil prices grew following the closure of the Strait of Hormuz. <\/p>\n\n\n\n

At the start of the month, fuel prices in South Africa rose by R3 for petrol and R7 for diesel despite the government lowering the fuel levy by R3. <\/p>\n\n\n\n

The April CPI data will thus reflect the true extent of the fuel price increases, and will likely tick up quickly. <\/p>\n\n\n\n

What to expect from interest rates <\/h2>\n\n\n
\n
\"\"<\/a><\/figure><\/div>\n\n\n

Moolman said that the SARB may view rising rental inflation as indicative of a recovering housing market and consumer demand. <\/p>\n\n\n\n

However, she said that the bank’s interest rate decisions for the foreseeable future will largely depend on developments in Iran and their impact on oil prices and the rand\/dollar exchange rate. <\/p>\n\n\n\n

“The SARB will pursue its new 3% inflation target, but if the war ends relatively soon, the bank may not have to hike interest rates,” said Moolman. <\/p>\n\n\n\n

The Reserve Bank’s own baseline expectation sees inflation ticking up, but remaining below the 1 percentage point tolerance band to 4%. <\/p>\n\n\n\n

In this scenario, global oil prices average higher at $78 a barrel in 2026, but start easing, reaching $68 a barrel in 2027 and falling to $65 a barrel in 2028.<\/p>\n\n\n\n

Although the rand weakens against the dollar, it maintains some of its resilience, trading around R17\/$ during the year. <\/p>\n\n\n\n

Interest rates would then continue to drop, but be delayed until the end of 2026, with the nominal policy rate declining from 6.47% in 2026 to 5.93% in 2028.<\/p>\n\n\n\n

However, the SARB also provided a scenario of a severe conflict lasting longer than a year, which would cause massive disruptions to energy supply and materially higher energy costs. <\/p>\n\n\n\n

A risk premium is assumed to increase by 20% at its peak, while the rand is assumed to depreciate by around 10% relative to the first quarter of 2026.<\/p>\n\n\n\n

As a result, inflation is expected to be sharply higher, and the 3% target will not be achieved within the forecast horizon. <\/p>\n\n\n\n

Second-round effects are starting to hit the economy, and the risk of de-anchored inflation expectations is higher, requiring a more forceful policy response to prevent inflation from becoming entrenched.<\/p>\n\n\n\n

An intermediate scenario sees a short conflict of about two months, which would result in modest tightening.<\/p>\n\n\n\n

Variable<\/th>Scenario<\/th>2026<\/th>2027<\/th>2028<\/th><\/tr><\/thead>
Brent Crude Oil (US$)<\/td>Baseline<\/td>78.00<\/td>68.00<\/td>65.00<\/td><\/tr>
<\/td>Intermediate<\/td>85.00<\/td>72.00<\/td>67.00<\/td><\/tr>
<\/td>Severe<\/td>97.00<\/td>118.00<\/td>130.33<\/td><\/tr>
<\/td><\/td><\/td><\/td><\/td><\/tr>
Headline Inflation (%)<\/td>Baseline<\/td>3.70<\/td>3.33<\/td>3.02<\/td><\/tr>
<\/td>Intermediate<\/td>4.05<\/td>3.58<\/td>3.01<\/td><\/tr>
<\/td>Severe<\/td>4.56<\/td>5.53<\/td>3.45<\/td><\/tr>
<\/td><\/td><\/td><\/td><\/td><\/tr>
Nominal Policy Rate (%)<\/td>Baseline<\/td>6.47<\/td>6.05<\/td>5.93<\/td><\/tr>
<\/td>Intermediate<\/td>6.67<\/td>6.12<\/td>5.93<\/td><\/tr>
<\/td>Severe<\/td>8.17<\/td>7.13<\/td>6.19<\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n
\n","protected":false},"excerpt":{"rendered":"

The South African Reserve Bank’s decision on future interest rates depends heavily on the Iran War. <\/p>\n","protected":false},"author":95,"featured_media":857844,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[961],"tags":[2924,3619],"class_list":["post-858041","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banking","tag-reserve-bank","tag-sarb"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/858041","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=858041"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/858041\/revisions"}],"predecessor-version":[{"id":858063,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/858041\/revisions\/858063"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/857844"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=858041"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=858041"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=858041"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}