SARB holds interest rates as Iran war fuels oil price hikes and inflationary risks

It was no surprise when the SA Reserve Bank (SARB) announced it has opted to hold the repo rate steady, in the face of the Iran war and the oil price increase and inflationary fears it has led to.

Delivering the Monetary Policy Committee (MPC) statement, Governor Lesetja Kganyago said the benchmark repo rate would remain at 6.75%. The decision was unanimous.

This means the prime lending rate still sits at 10.25%.

Up until mid-February, before the US and Israel launched attacks on Iran, analysts had expected rate cuts to resume in March.

Kganyago highlighted that conditions remain uncertain just a few weeks into the price shock the conflict is causing.

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"At this stage, it is obvious that global inflation will be higher in the near term, while growth will probably suffer from supply-chain disruptions and rising costs. But the longer-term outlook is less clear."

For the time being though, the Reserve Bank's growth projections for South Africa are largely unchanged.

"The latest data show the economy grew further in the fourth quarter of 2025, with output rising by 1.1% for the year as a whole. This is better than recent years but still well below longer-run averages. We have been encouraged by green shoots such as rising confidence and stronger investment, but the ongoing war could interrupt the growth recovery."

While inflation was at 3% for February, in line with the new target, higher energy prices will raise inflation in the near term, Kganyago said.

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"We expect headline inflation will soon accelerate to around 4%, with fuel inflation over 18% for the second quarter. Our baseline forecast then has a gradual unwinding of the shock, taking inflation back to 3% late next year."

Stephen Grootes gets comment from Kevin Lings, chief economist at Stanlib Asset Management.

Lings concurs that the SARB was not left with much choice in the face of geopolitical developments.

He points out that the vast majority of around 15 central banks that have met since the Iran war started, have kept rates on hold.

"There have been a couple that have hiked... but generally the thought at the moment is a 'wait and see'. And what you're looking for is how long does this crisis last, how long does the oil price stay at these levels."

And the longer oil prices stay at current high levels, the more damage this will do both to inflation and to growth.

"The primary focus is unfortunately going to be on inflation. So the tendency from most central banks wil be to wait and see, but keep indicating that the risk is to higher interest rates if the impact of the oil price broadens into many different price categories."

Scroll up to the audio player to listen to Lings' analysis