Citigroup has updated its outlook for South African monetary policy after the conflict in Iran pushed oil prices higher and raised uncertainty about inflation, the bank said in Johannesburg.
Gina Schoeman, Citigroup economist for South Africa, said the bank has raised its consumer price index forecast to a peak of 4.9% in the first quarter of next year, while core inflation is expected to approach but remain just below 4%.
Reflecting that inflation profile, Citi now anticipates the South African Reserve Bank will raise borrowing costs by a total of 50 basis points in 2026, beginning with increases next month. "The result of this, unfortunately, is that we think that the South African Reserve Bank is now likely to hike twice - once in May, once in July; 25 basis points each," Schoeman said.
The Reserve Bank targets 3% inflation within a one percentage point tolerance band, and Schoeman noted that policy settings are already in restrictive territory. "If they hike, it s simply to control their new 3% point target and to control inflation, because inflation impacts growth more than interest rates do," she added.
At its March meeting the central bank left its policy rate unchanged at 6.75%.
Citigroup also trimmed its economic growth forecast for South Africa, cutting its GDP projection to 1.2% from a prior estimate of 1.6%.
These projections reflect Citi s assessment that higher oil prices tied to geopolitical tensions can transmit into broader price pressures and shape the Reserve Bank s near-term decisions on interest rates. The bank's call for two 25 basis-point hikes in May and July 2026 is positioned as a response to the revised CPI path and the aim of keeping inflation close to the 3% target range.
While the bank expects tightening, the outlook also incorporates a downward revision to growth, with Citi lowering its 2026 forecast for South African growth to 1.2% from 1.6%. The combination of higher projected inflation and slower growth frames the central bank s likely policy posture in the months ahead.