SA’s inflation data for February surprised on the upside, rising to 5.6% y/y from 5.3% y/y in January. This was due largely to a hike in medical aid costs, as well as a higher petrol price. Increases in administered costs like medical aid, energy and water cannot be controlled by higher interest rates. Arguably, the SA Reserve Bank may have to accept that anchoring inflation around its 4.5% target is impossible and find a way to cut interest rates, or risk triggering a recession.

Around the world, other central banks cut policy rates in March, including Switzerland, Norway, Brazil, Mexico and Czech Republic. The US Federal Reserve held rates but indicated it would cut three times this year, despite elevated inflation. We anticipate the global interest rate cutting cycle will follow the Fed and start around the middle of the year, although a geopolitical or climate event could disrupt the outlook.