In this podcast, Stephen Backhouse, Head of Retail Strategy: Group Channels at STANLIB Asset Management, chats to Eulali Gouws, Head of Money Market, about the SA Reserve Bank’s surprising decision to keep repo rates on hold, despite higher inflation. Gouws explains the reasoning for the decision and how the STANLIB team positions the Money Market Fund to best respond to interest rate moves.
The South African Reserve Bank’s (SARB) interestrate hike in the second quarter was no surprise, given the effect of theUS/Iran war on fuel prices and inflation. But it was still a disappointment, asearlier in the year expectation was for two rate cuts in the second half of2026. The SARB has also indicated that further rate increases are possible ifsecondary inflation effects strengthen.
SA’s headline consumer inflation (CPI) in Mayrose to 4.5% from 4% in April, mainly due to higher fuel prices. This is thehighest level since July 2024 and it is above the SARB’s new 3% inflationtarget. Inflation is expected to remain elevated in the near term, withheadline CPI projected at 4.9% in June and 4.7% in July. The developing El Niñoweather pattern also presents upside risks to the inflation outlook frommid-2027 onwards.
South African short-term interest rates rose in the quarter, reflecting the SARB’s rate hike. Three-month JIBAR increased from 6.75% at the start of the quarter to 7% at end-June, while 12-month JIBAR declined from 7.73% to 7.59%. Treasurybills were broadly steady at the longer end, with the 12-month bill moving from7.7% to 7.76%, while the three-month bill rose from 6.86% to 7.15% in responseto the rate hike.
What does this mean for your investment?
Cash as an asset class delivered a stable performance in a volatile second quarter.
Investors in the STANLIB Money Market Fund enjoyed the benefits of the recent 0.25% rate increase, reflected in their portfolio returns.
The STANLIB Money Market Fund was well balanced at the end of the quarter holding a combination of fixed and floating rateinstruments to optimise yields in the current economic environment.
Looking ahead
Higher interest rates may add pressure toalready weak economic activity and will not directly reduce SA’s fuel inflation.However, the Reserve Bank is likely to remain focused on containingsecond-round effects, particularly as companies seek to pass higher fuel costsonto customers and as inflation expectations become more difficult to anchor.
