FX.co ★ Rand Gains as Hot Inflation Revives 50bp SARB Hike Bets

The South African rand strengthened to around 16.4 per US dollar, rebounding from a near one‑month low of 16.5 reached on Wednesday, as investors awaited Thursday’s South African Reserve Bank (SARB) policy decision. The recovery followed stronger‑than‑expected inflation figures, which increased the likelihood of a larger interest rate hike.

Annual inflation accelerated to 5.0% in June, its highest level in two years, up from 4.5% in May and exceeding the 4.7% consensus forecast. The rise was driven mainly by higher transport and housing costs. Core inflation also climbed, reaching 4.1%, its highest rate since September 2024.

Markets still largely expect the SARB to raise its benchmark interest rate by at least 25 basis points to 7.25%. However, the latest inflation data have revived expectations of a 50‑basis‑point increase. The central bank had already considered a 50bp move 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.