{"id":863636,"date":"2026-06-15T13:00:00","date_gmt":"2026-06-15T11:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=863636"},"modified":"2026-06-15T12:20:01","modified_gmt":"2026-06-15T10:20:01","slug":"big-shift-in-interest-rate-expectations-for-south-africa-5","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/863636\/big-shift-in-interest-rate-expectations-for-south-africa-5\/","title":{"rendered":"Big shift in interest rate expectations for South Africa"},"content":{"rendered":"\n

Traders have scaled back bets on additional South African interest-rate hikes after a US-Iran peace deal<\/a> sent oil prices tumbling, potentially reducing inflationary pressures.<\/p>\n\n\n\n

Forward-rate agreements are now pricing in 15 basis points of tightening at the South African Reserve Bank\u2019s July 23 policy meeting, down from 30 basis points a week ago. <\/p>\n\n\n\n

The contracts are pricing in a total of 32 basis points of rate hikes this year, down from 70 a week ago. <\/p>\n\n\n\n

That implies just one full quarter-point increase by the November rates meeting. <\/p>\n\n\n\n

While this is not a complete reversal of expectations\u2014another hike is still anticipated\u2014this is lower than the 50bps pencilled in before, and later than the potential hike seen in July.<\/p>\n\n\n\n

Policymakers\u00a0last month<\/a>\u00a0raised borrowing costs by 25 basis points to 7%, delivering their first increase in three years amid intensifying inflationary pressures from the Iran war. <\/p>\n\n\n\n

They also signalled that further tightening may be warranted if the conflict drags on.<\/p>\n\n\n\n

Inflation in Africa\u2019s biggest economy is expected to rise to 4.7% in May from 4% a month earlier, according to the median estimate of 18 economists in a Bloomberg survey. <\/p>\n\n\n\n

Some economists are anticipating an even bigger shock, moving as high as 5.1%. The central bank targets inflation at 3%.<\/p>\n\n\n\n

Following the weekend\u2019s peace agreement, however, investor expectations of average inflation over the next five years as measured by breakeven rates fell by 16 basis points to 4.23%.<\/p>\n\n\n\n

The easing of expectations should bolster the doves at the SARB’s Monetary Policy Committee, where they were outvoted 4-to-2 for the interest rate hike seen in May.<\/p>\n\n\n\n

Four of the six MPC members called for a hike, while two called for rates to remain unchanged.<\/p>\n\n\n\n

Reserve Bank governor Lesetja Kganyago noted at the time that the war in Iran was not the only pressure point for inflation, flagging weather conditions as another risk.<\/p>\n\n\n\n

Due to the elevated uncertainty, the SARB also presented three scenarios for future interest rates.<\/p>\n\n\n\n

One involved a prolonged Middle East crisis, leading to higher food and oil prices, plus a weaker rand. With the hopeful end to the conflict, the risk pressure on this point may ease.<\/p>\n\n\n\n

The second scenario involves the El Ni\u00f1o weather pattern, which usually brings drought to South Africa. <\/p>\n\n\n\n

The South African Weather Service has warned of the current drought patterns<\/strong><\/a>, which it said, while having a slower onset, still have destructive impacts.<\/p>\n\n\n\n

The third scenario considered by the SARB in its modelling factored in non-linear effects, i.e., other big shocks that affect inflation.<\/p>\n\n\n\n

Notably, all of the scenarios implied higher inflation and lower growth. All three scenarios showed some additional monetary policy tightening.<\/p>\n\n\n\n

With Bloomberg<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Traders have scaled back bets on additional South African interest-rate hikes after a\u00a0US-Iran peace deal\u00a0sent oil prices tumbling, potentially reducing inflationary pressures.<\/p>\n","protected":false},"author":10,"featured_media":848489,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[],"class_list":["post-863636","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/863636","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\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=863636"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/863636\/revisions"}],"predecessor-version":[{"id":863637,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/863636\/revisions\/863637"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/848489"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=863636"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=863636"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=863636"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}