South Africa Signals Rates May Stay Higher for Longer as Middle East Conflict Fuels Inflation Risks

June 11, 2026

Mintesinot Nigussie

The South African Reserve Bank has indicated that borrowing costs may rise again later this year as escalating tensions in the Middle East reshape the country’s inflation outlook and increase risks to financial stability.

The warning was outlined in the central bank’s latest Financial Stability Review, which showed a significant shift in policy projections after renewed geopolitical tensions triggered concerns over energy prices and inflationary pressures.

South Africa’s benchmark repo rate currently stands at 7.00 percent following a 25-basis-point increase delivered in May, the first interest rate hike by the central bank in three years. According to the report, the bank’s Quarterly Projection Model had previously suggested the possibility of rate cuts in 2026 before the Middle East conflict altered the outlook.

The review stated that the South African Reserve Bank’s Quarterly Projection Model, which had earlier pointed to possible rate cuts in 2026 before the Middle East conflict, was now indicating another rate increase in 2026 following the 25-basis-point hike implemented in May.

The central bank said higher global energy prices are expected to continue feeding into domestic inflation, prompting an upward revision to its inflation forecasts.

The review also highlighted wider financial risks linked to geopolitical uncertainty, volatile commodity prices and changing investor sentiment toward emerging markets.