South Africa’s (SA) central bank said this Tuesday that the Iran war presented material upside risks to the country’s inflation trajectory, with markets pricing in \u200btwo interest rate hikes this year, but that it still expected \u200cinflation to remain within the tolerance band of one percentage point above the 3% inflation target.<\/p>\n
The South African Reserve Bank (SARB) said that it expects headline inflation to be higher \u200bin the near term and average 3.7% this year before easing back \u200bto target by late 2027.<\/p>\n
In its twice-yearly Monetary Policy Review, the \u2060central bank said the energy shock was expected to affect but not \u200bderail the country’s transition to its 3% inflation target.<\/p>\n
“Uncertainty regarding the duration of \u200bthe Middle East conflict, the extent of infrastructure damage and the magnitude of second-round effects skews risks to the upside,” it said.<\/p>\n
Inflation was at 3% in February, the latest available \u200bdata showed, but this was before the Middle East conflict began.<\/p>\n
In its March \u200bmonetary policy committee statement, the bank showed two scenarios for the inflation outlook, one “intermediate” and \u200cone “severe”.<\/p>\n
In \u2060the severe scenario, oil remains above $97 per barrel for the year and inflation is expected to be sharply higher, and the inflation target will not be met within the forecast horizon, reflecting a larger and longer-lasting shock.<\/p>\n
The SARB also \u200bsaid market-implied interest rate \u200bexpectations now suggest \u2060scope for about two 25 basis-point hikes this year. This contrasts with two cuts in 2026 that were anticipated \u200bjust before the conflict began.<\/p>\n
The SARB said that despite the \u200buncertainty around \u2060the war’s duration, the country was in a stronger position now than during the 2022 energy price shock thanks to a lower inflation target and ongoing fiscal \u2060consolidation \u200bthat had lowered the risk premium.<\/p>\n
The bank’s Monetary \u200bPolicy Committee has held its key rate at 6.75% at every meeting this year since reducing it by \u200b25 basis points in November 2025.<\/p>\n
–Reuters–<\/p>\n","protected":false},"featured_media":22416,"template":"","meta":{"_acf_changed":false},"news-type":[44],"class_list":["post-32656","news","type-news","status-publish","has-post-thumbnail","hentry","news-type-finance","entry"],"acf":{"short_description":"The South African Reserve Bank said that it expects headline inflation to be higher \u200bin the near term.","published_date":"","news_description":"The South African Reserve Bank said that it expects headline inflation to be higher \u200bin the near term.","form_embed":"","author":"","image_caption":""},"_links":{"self":[{"href":"https:\/\/www.channelafrica.co.za\/channelafrica\/wp-json\/wp\/v2\/news\/32656","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.channelafrica.co.za\/channelafrica\/wp-json\/wp\/v2\/news"}],"about":[{"href":"https:\/\/www.channelafrica.co.za\/channelafrica\/wp-json\/wp\/v2\/types\/news"}],"version-history":[{"count":1,"href":"https:\/\/www.channelafrica.co.za\/channelafrica\/wp-json\/wp\/v2\/news\/32656\/revisions"}],"predecessor-version":[{"id":32657,"href":"https:\/\/www.channelafrica.co.za\/channelafrica\/wp-json\/wp\/v2\/news\/32656\/revisions\/32657"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.channelafrica.co.za\/channelafrica\/wp-json\/wp\/v2\/media\/22416"}],"wp:attachment":[{"href":"https:\/\/www.channelafrica.co.za\/channelafrica\/wp-json\/wp\/v2\/media?parent=32656"}],"wp:term":[{"taxonomy":"news-type","embeddable":true,"href":"https:\/\/www.channelafrica.co.za\/channelafrica\/wp-json\/wp\/v2\/news-type?post=32656"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}