South Africa was supposed to be cutting rates this year. Goldman Sachs no longer thinks so.
The bank just scrapped its rate-cut call and now sees two quarter-point hikes by July - a full reversal driven by one thing: the Iran war pushing oil prices higher.
Goldman had been calling for alternating rate cuts in 2026 that would have pulled South Africa's policy rate down to 5%. That forecast is now gone.
The bank now sees the South African Reserve Bank lifting rates by 25 basis points in May, followed by another 25 basis point hike in July.
The shift comes down to oil, with Goldman raising its oil and inflation forecasts after the war sent crude sharply higher. The new math no longer supports easing.
Goldman still expects South Africa to reach a 5% rate floor at some point - just not until 2029, which is a four-year delay on the path investors had already priced in.
That delay is not just a South Africa story, since every emerging market central bank that imports oil is running the same kind of math right now.
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South African inflation now looks set to average 4% in 2026 before cooling to 3.4% in 2027, according to Goldman's updated forecast.
South Africa moved to a 3% inflation target with a one percentage point tolerance band in late 2025. Goldman's 4% forecast for this year sits right at the top of that range.
Goldman sees price growth running between 4% and 4.5% over the coming quarters, which is not crisis-level but enough to push rate cuts off the table.
Why it matters: South Africa is a major oil importer, so a sustained rise in crude feeds straight into local prices through fuel, transport, and food costs.
The rand had a strong 2025, gaining roughly 14%, and has outperformed most emerging market peers even after pulling back since the conflict began.
That gives the central bank some room to move either way, but it also gives policymakers a reason to lean toward hiking if oil keeps climbing.
The South African Reserve Bank's next decision lands on May 28, after the bank kept rates on hold at its last two meetings at 6.75%, following a string of cuts in 2024 and 2025.
If Goldman is right, the next move will be a 25 basis point hike that almost no one was forecasting two months ago - the kind of pivot that tends to shake up emerging market bonds and currencies.
A war 7,000 miles away just rewrote South Africa's rate path.
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