- July 24, 2026
- Posted by: vitalclick
- Category: Investments
The South African rand weakened by more than 2% against the US dollar in the immediate aftermath of Thursday’s Monetary Policy Committee (MPC) announcement that it had left interest rates unchanged, catching markets off guard after they had widely expected another 25 basis-point increase.
Source: Reuters.
“The surprise hold has triggered a sharp sell-off in the rand, which weakened above R16.80/$,” Andre Cilliers, currency strategist at TreasuryONE said.
This set the rand as the world’s worst-performing currency on the day, with it having recovered some of its losses by Friday morning, In early morning trade it was trading around R16.77 to the US dollar, with it remaining under pressure.
The Sarb’s decision to leave the repo rate unchanged at 7% surprised economists and financial markets, particularly after South Africa’s headline inflation accelerated to 5% in June, its highest level in two years.
The stronger-than-expected inflation reading had reinforced expectations that policymakers would continue tightening monetary policy to keep inflation expectations anchored.
“Markets are now questioning whether monetary policy remains sufficiently restrictive given rising oil prices, inflation risks and ongoing geopolitical uncertainty,” says Andre Cilliers, currency strategist at TreasuryONE.
But, according to Raymond Parsons, NWU Business School economist, the MPC majority view sees longer term forces at work that could bring headline inflation back to the Sarb’s 3% inflation target by early 2027.
“There is an MPC expectation therefore that, if global headwinds gradually dissipate, inflation will eventually wind down by year-end. Overall, there is still likely to be continued economic growth, but it will be at a slower pace in the second half of 2026,” he said.
“It seems that GDP growth for 2026 as a whole may now only be about 1.2%-1.3%, compared with the 1.6% growth assumption on which the Budget was based, and which the National Treasury is revisiting.”
Oil surges above $100
Meanwhile, global markets remain on edge after Houthi attacks on Saudi oil tankers in the Red Sea widened the Middle East conflict to a second major shipping route.
“Brent crude has climbed above $100 per barrel for the first time since May as shipping costs soar and vessels divert around Africa, raising fears of prolonged supply disruptions. The sharp rise in oil prices has reignited global inflation concerns and strengthened expectations that central banks may need to keep interest rates higher for longer,” Cilliers said.
Flash PMI data in focus
Attention now turns to today’s Flash PMI releases from Europe, the UK and the US, which will provide the first meaningful reading of business activity since the recent escalation in Middle East tensions.
“Investors will be watching closely to see whether higher energy prices are beginning to weigh on global growth while also feeding through into inflation. The data could influence expectations around the next moves from both the ECB and the Federal Reserve,” Cilliers said.