{"id":863793,"date":"2026-06-17T14:00:00","date_gmt":"2026-06-17T12:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=863793"},"modified":"2026-06-17T13:11:40","modified_gmt":"2026-06-17T11:11:40","slug":"good-news-about-interest-rates-in-south-africa-2","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/banking\/863793\/good-news-about-interest-rates-in-south-africa-2\/","title":{"rendered":"Good news about interest rates in South Africa"},"content":{"rendered":"\n

South Africa’s latest inflation figures have come in well above the South African Reserve Bank (SARB) target, but a peace agreement between the USA and Iran could prevent further interest rate increases. <\/p>\n\n\n\n

South Africa’s headline inflation rose to 4.5% in May 2026, up from 4.0% in April. This is well above the SARB’s new target of 3%, but still came in below market expectations of 4.7%.<\/p>\n\n\n\n

The increase again reflected the ongoing elevated fuel prices facing South Africa. The war between the US and Iran and the subsequent closure of the Strait of Hormuz led to oil prices skyrocketing. <\/p>\n\n\n\n

Core inflation, which excludes food and energy, also edged higher to 3.8%. The overall increase in headline inflation was caused primarily by housing, utilities, and transport, with the latter up 9.4%. <\/p>\n\n\n\n

Nevertheless, Dr Elna Moolman,\u00a0Standard Bank\u00a0Group Head of South Africa Macroeconomic Research, said that inflation was marginally better than expected. <\/p>\n\n\n\n

Moolman said the downside surprise largely stemmed from food prices, which remained flat in May. Food prices rose only 1.6%, providing some relief to consumers amid steep increases in fuel prices. <\/p>\n\n\n\n

Lower food inflation pressure was primarily due to declines in meat and fruit prices in May. The data was supported by the imminent signing of an interim peace deal between the USA and Iran. <\/p>\n\n\n\n

She said that the upside risk to the inflation trajectory has thus subsided. It also increases the chance that the SARB will not have to hike interest rates further. <\/strong><\/p>\n\n\n\n

The Monetary Policy Committee (MPC) of the SARB recently hiked interest rates by 25 basis points, raising the repo rate to 7.0% and the prime rate to 10.5%. <\/p>\n\n\n\n

Not so optimistic <\/h2>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n

While Moolman is optimistic that further interest rate hikes are unlikely, Anchor Capital Economist Lerato Ntuli expects another hike. <\/p>\n\n\n\n

While the preliminary agreement between the USA and Iran points to downside risks for global oil prices, a return to normal production and export levels in the Gulf will likely be gradual. <\/p>\n\n\n\n

This will keep oil prices above pre-conflict levels in the near term, Ntuli warned. <\/p>\n\n\n\n

While food inflation eased in May, Ntuli warned that elevated input costs across the agricultural sector, including fuel, fertiliser, and logistics, will likely filter through to food costs. <\/p>\n\n\n\n

This places upward pressure on food prices in the coming months. Another major food inflation factor is the potential emergence of an El Ni\u00f1o weather event, which can bring drought to South Africa. <\/p>\n\n\n\n

El Ni\u00f1o could disrupt agricultural production and trigger an increase in food prices. <\/p>\n\n\n\n

“Against this backdrop, the SARB is expected to maintain a cautious stance, with one additional 25 basis point rate hike still anticipated in 2H26,” said Ntuli. <\/p>\n\n\n\n

At the latest MPC announcement in May, SARB Governor Lesetja Kganyago warned that three further interest rate increases may be needed to get inflation back in line. <\/p>\n\n\n\n

A possible interest rate hiking cycle seemed incredibly unlikely at the start of the year, when the MPC was widely expected to cut interest rates, given that inflation was contained. <\/p>\n\n\n\n

However, the energy crisis has forced central banks worldwide to tighten monetary policy. The European Central Bank (ECB) was the largest bank to hike interest rates, the first time since 2023. <\/p>\n\n\n\n

The next MPC decision will be made on 23 July, followed by announcements on 23 September and 19 November. <\/p>\n","protected":false},"excerpt":{"rendered":"

The latest inflation print is well-above the Reserve Bank’s target, but peace between the US and Iran could halt any further interest rate increases. <\/p>\n","protected":false},"author":95,"featured_media":857844,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[961],"tags":[4043],"class_list":["post-863793","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banking","tag-south-african-reserve-bank"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/863793","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=863793"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/863793\/revisions"}],"predecessor-version":[{"id":863798,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/863793\/revisions\/863798"}],"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=863793"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=863793"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=863793"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}