We had expected the South African Reserve Bank (SARB) to resume its rate-cutting cycle at its 26 March meeting. However, this was before the events US/Israel alliance launched military action against Iran, which has materially changed the outlook. Iran’s closure of the Strait of Hormuz continues to pushing prices above US$100/bbl and introducing a significant upside risk should disruptions persist.

This shift has prompted a more cautious, “higher-for-longer” stance from the Monetary Policy Committee (MPC), despite South Africa’s (SA) February a second consecutive month, easing to 3.0%, in line with the SARB’s revised 3% mid-point target (within a 2%–4% band). While inflation has been on a energy costs now pose clear upside risks, particularly through fuel, transport, and second-round effects. Externally, conditions have become less supportive.

Oil prices are c. 30% higher while the gold price has declined by around 20%, resulting in a deterio As a net importer of oil, this dynamic places pressure on SA’s current account and contributes to rand weakness. Although we do not believe a sustain R17.00/US$1 is fundamentally justified, sentiment-driven volatility and global risk aversion may lead to temporary overshooting.

Against this backdrop, the SARB’s MPC opted to hold the repo rate at 6.75% (prime at 10.25%), with a unanimous decision among the six members of heightened uncertainty. The policy bias has shifted: risks are no longer skewed toward easing but toward a delay in rate cuts and, in more extreme sce The SARB has also revised its headline inflation forecast for 2026 upward to 3.7% from January’s 3.3% forecast. For 2027 and 2028, it now expects a respectively.

Figure 1: The history of the SARB MPC’s repo rate changes, %

We believe that a sustained move in the rand above R17.50/US$1 or oil prices above US$135/bbl would materially increase the probability of a rate h would likely be short-lived, given the negative impact on growth and consumers, it underscores the shift in the policy balance. Our base-case scenario is that the interest rate remains on hold in the near term, with rate cuts deferred until there is greater clarity on the oil price traje developments.

Conversely, a meaningful de-escalation in the conflict could quickly reopen the window for easing rates. However, for now, the bar for c Given this uncertainty, we remain cautious on the rand and see more compelling opportunities in other asset classes, especially where recent volatility for example, appear oversold and may offer attractive entry points for investors willing to look through near-term risks.