Tough times ahead with looming fuel price hikes and expected rate hold, even as SA salaries rise consistently

South African consumers are bracing for fuel hikes in a few weeks, and analysts are forecasting that the Reserve Bank's Monetary Policy Committee (MPC) will announce an interest rate hold on Thursday.

The outlook has changed significantly since the US and Israel attacked Iran on 28 February, with the continuing Middle East conflict setting off oil production ad route disruptions along with inflationary fears.

At the same time though, the PayInc Net Salary Index shows a marginal 0.1 increase between January and February, continuing a steady upward trend.

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The year had started on an optimistic note, given that the gradual improvement in economic activity in South Africa expected in 2026 would sustain the recovery in salaries that started in 2024.

However, the uncertainty around geopolitical events has overshadowed that rosy outlook, concurs independent economist Elize Kruger.

"We started the year off on a good footing with salaries ticking higher and the February figures they continue to stabilise but at an elevated level. It's actually a recovery that started in 2024 and has been ongoing as a reflection really of a better economic environment. It's almost the same scenario we had with COVID where we talk about pre-COVID and post-COVID, and now we're talking prewar and postwar."

So, up until February it's been a good news story but of course now the outlook has changed, Kruger laments.

Where she had initially been factoring in two 25-basis point rate cuts in the first six months of 2026, that is now definitely out, she says.

"And if I look at the inflation numbers...if we see quite hefty fuel price increases in both April and May, there is a good chance for a second-round effect to follow. Then I'm also thinking that a rate hiking scenario is not completely off the table."

To hear more about the possible repercussions of the Iran war, listen to the interview with Kruger in the audio at the top of the article