South Africa’s prospects of cutting interest rates have dimmed after households, businesses, and economists raised their inflation expectations in the wake of the United States-Iran conflict, strengthening the case for another policy rate hike this month.
A second-quarter survey by the Bureau for Economic Research (BER) showed inflation expectations rose across all major respondent groups as the Middle East conflict disrupted global energy markets, pushing up fuel prices and clouding the country’s inflation outlook. In May, annual inflation in Africa’s biggest economy rose for the third month to 4.5 percent, marking the steepest since July 2024, though below the expected 4.7 percent.
The survey found that professional forecasters—including analysts, business executives and trade union officials—now expect inflation to average 4.4 percent this year, up from 3.6 percent in the first quarter and well above the South African Reserve Bank’s (SARB) preferred three percent target.
The results reinforce expectations that the central bank could tighten monetary policy again when its Monetary Policy Committee meets in July 23. In May, the SARB raised its benchmark repo rate for the first time since 2023 to seven percent, citing worsening inflation risks.
