SARB holds rates as global inflation storm brews

The South African Reserve Bank's Monetary Policy Committee (MPC) has maintained the policy rate at 6.75 percent, following a 25 basis point reduction in November 2025.

This decision reflects a complex economic environment.

Domestically, headline inflation eased to 3 percent in February 2026, hitting the target, and averaged 3.2 percent in 2025 – a 21-year low.

However, global developments are creating renewed upward pressure.

The escalating Middle East conflict and rising oil prices have intensified global inflation concerns, threatening a disinflation reversal.

The SARB projects domestic headline inflation to rise temporarily in the near term, peaking at 4 percent in the second quarter of this year, before returning to the 3 percent target from late 2027.

Real output is forecast to expand by 1.4 percent this year, up from 1.1 percent in 2025, but the recent oil shock has heightened the risk of stagflation.

The escalating Middle East conflict has significantly impacted the global economy, pushing Brent crude oil prices up by 70 percent and European natural gas prices by 75 percent.

This intensified supply-chain pressures and triggered large-scale sell-offs in financial markets, driving volatility higher.

Global inflation, which averaged 4.2 percent in 2025, largely stalled during the review period.

Most major central banks have paused policy easing amid heightened uncertainty.

Earlier, the Federal Reserve cut rates by 50 basis points and the Bank of England by 25 basis points.

The European Central Bank held rates steady, while the Bank of Japan hiked by 25 basis points to a 30-year high of 0.75 percent.

Markets are now pricing in rate increases in many jurisdictions, a marked reversal from earlier expectations.