The South African rand traded around 16.2 per USD, hovering near its strongest level since early March, as markets digested the latest inflation figures while monitoring the upcoming Fed policy decision and the expected formal signing of a US–Iran peace agreement. Headline inflation rose to 4.5% in May, the highest since July 2024 and up from 4% in April, though still below the consensus forecast of 4.7%. Core inflation also picked up, from 3.6% to 3.8%, indicating that underlying price pressures remain relatively contained.
The SARB raised interest rates in May amid expectations that inflation would accelerate as second-round effects of the Iran conflict and the energy crisis filtered through the economy. At the same time, the interim US–Iran accord to reopen the Strait of Hormuz is seen as easing pressure on policymakers to adjust rates at the July 23 meeting. The sharp drop in oil prices after the deal’s announcement has reduced inflationary pressures and shifted market expectations for monetary tightening from two rate hikes to just one by year-end.
