Monthly Rates Dashboard – Jun 2026

The FRA curve has moved decisively towards a more hawkish SARB profile in recent months, with markets now fully pricing a 25bp hike in July and assigning a high probability to a follow-up move in September. This broadly aligns with ETM’s in-house view, which sees two 25bp hikes delivered at the July and September meetings. Beyond that, market pricing is more tentative, attaching only a small probability to a November hike but a meaningfully higher chance of another move in January, particularly if November passes without action. The shift reflects growing concern that external inflation risks could complicate the SARB’s policy path. Oil prices remain the key upside threat, especially given the Iran war premium and South Africa’s sensitivity to fuel costs. This matters more under the SARB’s new 3% inflation-targeting mandate, which leaves less tolerance for price shocks. At the same time, any reversal pressure on a deeply overvalued ZAR would strengthen the case for pre-emptive tightening, as the SARB may need to defend currency stability to prevent even harsher imported inflation.

The implied path highlights a widening gap between market pricing and the SARB’s model-based baseline. The market and ETM both expect further tightening through the second half of 2026, lifting the repo rate back towards 7.50%, whereas the QPM still slopes lower. That divergence should not be read as the MPC “ignoring” its own forecast. The QPM is a workhorse forecasting tool within a broader suite of models, designed to quantify policy trade-offs rather than mechanically dictate decisions. SARB research describes it as one input into the forecasting process, with judgment and risk assessment layered on top. The model can therefore still show cuts if its baseline assumes contained inflation, weak demand and a stable currency, while markets price the risks around that baseline. Those risks have shifted materially. Higher oil prices linked to the Iran war would feed directly into SA fuel inflation, while any renewed ZAR weakness would add imported inflation pressure. Under a stricter 3% inflation target, the MPC has less room to look through those shocks, making the market’s hawkish repricing understandable.