{"id":868140,"date":"2026-08-01T13:00:00","date_gmt":"2026-08-01T11:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=868140"},"modified":"2026-07-31T16:03:23","modified_gmt":"2026-07-31T14:03:23","slug":"big-shift-in-expectations-for-interest-rates-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/868140\/big-shift-in-expectations-for-interest-rates-in-south-africa\/","title":{"rendered":"Big shift in expectations for interest rates in South Africa"},"content":{"rendered":"\n

After the Monetary Policy Committee’s (MPC) surprise decision to hold interest rates, expectations for future hikes\u2014or even cuts\u2014are swinging.<\/p>\n\n\n\n

This is a significant shift from the market view just a few weeks ago that multiple hikes were on the cards for 2026.<\/p>\n\n\n\n

The Reserve Bank’s decision to hold interest rates caught many economists by surprise, after many expected a hike in response to June’s inflation rate.<\/p>\n\n\n\n

South Africa saw inflation rise by 5% in June, exceeding its current target of 3% and outpacing many experts’ expectations.<\/p>\n\n\n\n

SARB chairman Lesetja Kganyago said the MPC’s decision was not based on the figures from June but rather on its current inflation forecasts for the remainder of the year.<\/p>\n\n\n\n

The MPC has adjusted its inflation forecast for the end of 2026 from 4.4% to 4.0%, citing relatively low food inflation in South Africa.<\/p>\n\n\n\n

It also said that the country’s current policies were restrictive enough to make a second consecutive rate hike unnecessary.<\/p>\n\n\n\n

Investec economist Lara Hodes noted that both consumer and business confidence have recently deteriorated in South Africa.<\/p>\n\n\n\n

This has led to lowered economic activity in the country since the start of the conflict between the US and Iran.<\/p>\n\n\n\n

An interest rate hike poses a risk of further reducing economic participation, thereby threatening South Africa’s already-stagnating economy.<\/p>\n\n\n\n

The Reserve Bank previously raised interest rates by 25 basis points in May, in response to climbing global oil prices.<\/p>\n\n\n\n

At the time, the bank warned that a second rate hike was possible based on future oil prices and weather conditions.<\/p>\n\n\n\n

South Africa is expected to be affected by an El Ni\u00f1o weather pattern in summer, which could lead to drought conditions and pose challenges for the agricultural sector.<\/p>\n\n\n\n

This could potentially drive food inflation higher, as farms struggle to produce without reliable rainfall and lower dam levels.<\/p>\n\n\n\n

What South Africa can expect<\/h2>\n\n\n\n
\"\"<\/a>
PSG Financial Services Chief Economist Johann Els<\/figcaption><\/figure>\n\n\n\n

The Reserve Bank said additional interest rate hikes are possible for the future, based on several factors, including inflation forecasts and fuel prices.<\/p>\n\n\n\n

It said that if inflation expectations remain elevated, South Africans should expect another interest rate increase and for rates to remain higher for longer.<\/p>\n\n\n\n

It also noted that if oil prices remain high, another interest rate hike is possible. This would be the case if global oil prices sit around the $100-a-barrel mark and only drop lower in 2029.<\/p>\n\n\n\n

If oil prices fall to around $78 per barrel and then continue to decline, an additional interest rate hike may not be necessary.<\/p>\n\n\n\n

PSG chief economist Johann Els said he expects oil prices to fall fairly quickly from their current high, based on historical patterns.<\/p>\n\n\n\n

“Once oil stays elevated for a while, as the Middle East conflict has caused, it often falls much faster than expected,” he said.<\/p>\n\n\n\n

Currently, the Reserve Bank is forecasting global oil prices to average roughly $82 per barrel, down from its previous assumption of $91 per barrel.<\/p>\n\n\n\n

He said this scenario could actually lead to rate cuts later this year, if inflation falls in line with declining fuel costs.<\/p>\n\n\n\n

“Under this positive scenario, the Reserve Bank’s model actually brings back rate cuts later this year already,” he said.<\/p>\n\n\n\n

He also commended the MPC for its current interest rate strategy, saying that the Reserve Bank is “clearly forward-looking.”<\/p>\n\n\n\n

“They recognise the risks, but policy is based on where inflation is going, not where it is today,” he said.<\/p>\n\n\n\n

He said the Reserve Bank appears to be increasingly concerned about the economic pressures already being placed on South African households, and is aligning its policies with this concern.<\/p>\n\n\n\n

“Households are under pressure from higher fuel prices, confidence has weakened, recent activity data has disappointed, and export commodity prices remain soft,” he said.<\/p>\n","protected":false},"excerpt":{"rendered":"

After the Monetary Policy Committee’s (MPC) surprise decision to hold interest rates, expectations for future hikes\u2014or even cuts\u2014are swinging.<\/p>\n","protected":false},"author":131,"featured_media":862745,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"posted","_sma_x_autopost_error":"","_sma_x_post_id":"2083508299454943682","_sma_facebook_post_id":"191437357620492_2163504987803234","_sma_instagram_post_id":"17997883407003131","_sma_x_attempts":1,"footnotes":""},"categories":[11121],"tags":[1498,25988,20029,8927,3618,4671,2924],"class_list":["post-868140","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-investec","tag-johan-els","tag-lara-hodes","tag-lesetja-kganyago","tag-monetary-policy-committee","tag-psg","tag-reserve-bank"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/868140","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\/131"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=868140"}],"version-history":[{"count":14,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/868140\/revisions"}],"predecessor-version":[{"id":868174,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/868140\/revisions\/868174"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/862745"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=868140"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=868140"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=868140"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}