South Africa Tightens Monetary Policy as Iran War Fuels Inflation Concerns

May 29, 2026

Mintesinot Nigussie

South African Reserve Bank raised its benchmark interest rate to 7.00 percent on Thursday, signalling mounting concern among policymakers over inflationary pressures linked to the Iran war and higher global energy prices.

The 25-basis-point increase marked the central bank’s first rate hike in three years and placed South Africa among a limited group of emerging economies that have tightened monetary policy since the conflict began in late February.

At the same time, the central bank lowered its economic growth projections, forecasting expansion of 1.2 percent this year and 1.7 percent next year.

Governor Lesetja Kganyago said policymakers were responding to increasingly complex inflation risks driven by overlapping global shocks.

The rate increase exposed differing views inside the Monetary Policy Committee. Four members supported the quarter-point increase, while two voted to keep rates unchanged.

The central bank revised its inflation outlook sharply upward, projecting consumer inflation at 4.4 percent this year and 3.7 percent next year.