SARB Sees 3.7% Inflation in 2024, Flags Two Rate Hikes Amid Iran War Risk

TL;DR SARB forecasts 3.7% average inflation for 2024 and sees scope for two 25‑basis‑point rate increases this year as the Iran war adds upside price pressure.

Context The South African Reserve Bank held its benchmark repo rate at 6.75% after a 25‑bp cut in November 2025. Inflation stood at 3% in February, before the latest escalation in the Middle East. The bank says the conflict introduces uncertainty over oil prices, infrastructure damage, and second‑round effects that could push consumer prices higher.

Key Facts SARB projects headline inflation to average 3.7% in 2024 before returning to the 3% target by late 2027. Market pricing now reflects potential for two 25‑bp interest rate hikes in 2024, a shift from the two cuts anticipated in 2026 prior to the war. The bank warned that uncertainty about the conflict’s duration, damage magnitude, and spill‑over effects skews inflation risks to the upside.

What It Means Higher inflation expectations could keep the rand under pressure; the ZAR/USD spot rate slipped 1.2% to 18.45 after the announcement. The JSE Top 40 fell 0.8%, with energy‑heavy Sasol (SOL.J, market cap ≈ ZAR 150 bn) down 0.6% and Anglo American (AGL.J) down 0.5%. Government bond yields rose, with the 10‑year benchmark climbing 8 bps to 9.42%, reflecting anticipation of tighter policy. The transmission channel works through higher fuel costs feeding into transport and manufacturing prices, and potential wage‑price spirals if businesses anticipate sustained cost pressures.

Watch for upcoming SARB monetary policy minutes, weekly oil price data, and rand volatility to gauge whether the bank follows through on the priced‑in rate hikes.