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Commerzbank analyst Volkmar Baur expects the South African Reserve Bank (SARB) to keep rates unchanged, despite inflation having fallen to its new 3% target and real rates remaining restrictive. The Iran conflict, higher Oil prices and a weaker South African Rand (ZAR) argue for caution, though an eventual cut later in 2026 is possible if geopolitical risks and energy prices ease.
High real rates but caution prevails
“The market is not pricing in any change to the key interest rate for today’s monetary policy meeting of the South African Reserve Bank (SARB), and none of the analysts surveyed by Bloomberg expect a change either. Before the Iran conflict began, the outlook was different, and we, too, had actually been targeting March for a rate cut at the start of the year.”
“Yet there are actually many factors pointing toward another cut. Inflation fell in both the headline and core rates in February to the central bank’s new target of 3%, and when looking at the last three months on a seasonally adjusted and annualized basis, the trend is actually even slightly lower. “
“But the Iran conflict does provide good reasons to remain cautious today. The inflation target is still new, and inflation expectations are not yet anchored at 3%, even though they have continued to fall in recent months. The rise in oil prices will sooner or later be reflected in gasoline prices, which, at 3.8%, carry a relatively high weight in the consumer price index.”
“In addition, the South African rand has weakened by over 6% against the US dollar since the beginning of the month, which will also be felt through higher import prices.”
“For now, therefore, we must wait and see. Should the conflict come to an end soon and oil prices return to normal, at least in part, the possibility of an interest rate cut is likely to arise again later this year. If, on the other hand, the conflict persists and weighs even more heavily on global risk sentiment, higher interest rates will at least help take some of the pressure off the rand.”
