Interest rates hold steady as Middle East tensions cloud outlook

Economist, Dawie Roodt, says the decision to keep interest rates unchanged comes as no surprise, but warns that escalating tensions in the Middle East are creating uncertainty about the economic outlook.

His remarks come after the South African Reserve Bank’s (SARB) decision to hold the repo rate at 6.75%, with the prime lending rate remaining at 10.25%.

Roodt however cautioned that the ongoing conflict is already driving up global oil prices, a development likely to push up fuel, fertiliser and food costs locally in the coming months.

“We know the war in the Middle East will have a huge negative impact on the price of petrol, diesel and fertiliser prices. But we will only see the real big effect in the April numbers,” Roodt added.

South Africa is expected to see petrol and diesel prices increase by between R5 and R10 per litre from 1 April 2026, potentially marking the steepest fuel price hikes in the country’s history.

Reserve Bank Governor, Lesetja Kganyago, echoed the cautious stance, saying the global outlook remains uncertain and expectations of interest rate cuts have weakened.

In previous meetings we warned of elevated risks, and we have been proceeding cautiously in our rate setting. Now a crisis has hit, this prudent approach is proving appropriate. #SARBMPCMAR26 #SARBPolicyRate #InterestRates

— SA Reserve Bank (@SAReserveBank) March 26, 2026

“The longer-term outlook is less clear. In these circumstances, leading central banks have generally kept rates unchanged as they wait for more information. Markets have largely dropped expectations for rate cuts in major economies, and probabilities of rate hikes have risen,” Kganyago said.

The Congress of South African Trade Unions (COSATU) has welcomed the decision to pause rate hikes but warned of severe consequences for workers.

The union has called on government to intervene and cushion households from the looming fuel price increases.

“Many businesses will not be able to manage a 50% hike in diesel prices. Many will retrench workers in large numbers…Workers already spend on average of 40% of their salaries on transport. This will now jump to 50% -60%. Workers now have to choose between feeding their children and travelling to work and school,” said the union’s Parliamentary Coordinator, Matthew Parks.

While the pause in interest rates offers some short-term relief, rising fuel costs are expected to place renewed strain on South Africa.

April’s tough – Inflationary pressures. #SARBMPCMAR26#SARBPolicyRate

— Tsepo Diholo (@Tsepodiholo) March 26, 2026