South African Rand Slides After SARB Surprises With Hold

2026-07-23 13:39 By Joana Ferreira 1 min. read

The South African rand weakened to ZAR 16.7 per US dollar, its lowest level since May 19, after the South African Reserve Bank unexpectedly left its benchmark repo rate unchanged at 7.0% at its July meeting.

The decision, approved by a 4–2 vote, defied market expectations for at least a 25-basis-point hike.

The SARB cited a modestly improved inflation outlook and weaker economic growth, while reaffirming its commitment to bringing inflation back to its 3% target over time.

Governor Lesetja Kganyago warned that renewed conflict in the Middle East, which has pushed up oil and fertilizer prices, could require further tightening if higher fuel costs feed through to food prices and core inflation.

South Africa's annual inflation accelerated to 5.0% in June, the highest in two years, while core inflation rose to 4.1%, its strongest reading since September 2024.

Both measures remain above the upper end of the SARB's 3% ±1 percentage point target range.



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South African Rand Slides After SARB Surprises With Hold
The South African rand weakened to ZAR 16.7 per US dollar, its lowest level since May 19, after the South African Reserve Bank unexpectedly left its benchmark repo rate unchanged at 7.0% at its July meeting. The decision, approved by a 4–2 vote, defied market expectations for at least a 25-basis-point hike. The SARB cited a modestly improved inflation outlook and weaker economic growth, while reaffirming its commitment to bringing inflation back to its 3% target over time. Governor Lesetja Kganyago warned that renewed conflict in the Middle East, which has pushed up oil and fertilizer prices, could require further tightening if higher fuel costs feed through to food prices and core inflation. South Africa's annual inflation accelerated to 5.0% in June, the highest in two years, while core inflation rose to 4.1%, its strongest reading since September 2024. Both measures remain above the upper end of the SARB's 3% ±1 percentage point target range.
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The South African rand strengthened to around 16.4 per US dollar, recovering from a near one-month low of 16.5 hit on Wednesday, as investors awaited Thursday's South African Reserve Bank (SARB) policy decision. The rebound followed stronger-than-expected inflation data, which boosted expectations of a larger rate hike. Annual inflation accelerated to 5.0% in June, the highest in two years, from 4.5% in May and above forecasts of 4.7%, driven mainly by transport and housing costs. Core inflation also rose to 4.1%, its highest level since September 2024. Markets still expect the SARB to raise its benchmark rate by at least 25 basis points to 7.25%, but the latest data have revived expectations of a 50bp move. The central bank considered such an increase in May, and with inflation now above the revised 4.0% upper bound of its 3% ±1 percentage point target range, the case for a larger hike has strengthened.
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South African Rand Weakens Despite Hotter-Than-Expected Inflation
The South African rand weakened to 16.5 per US dollar as investors balanced stronger-than-expected domestic inflation against rising oil prices, which could further fuel price pressures. South Africa's annual inflation accelerated to 5.0% in June, the highest in two years, from 4.5% in May and above market expectations of 4.7%, driven mainly by transport and housing and utilities. Core inflation also rose to 4.1%, its highest level since September 2024. With both headline inflation and the core measure remaining above the South African Reserve Bank's 3% target, markets continue to expect the central bank to raise its benchmark interest rate by 25 basis points to 7.25% on Thursday. Meanwhile, oil prices climbed to their highest level in more than a month as Middle East tensions intensified after US President Donald Trump warned of further strikes on Iran and pledged retaliation if Iran-backed Houthi rebels disrupt shipping through the Red Sea.
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