The bank’s new research note states that the South African Reserve Bank (SARB) is likely to increase its repo rate by another 25 basis points during its next policy meeting to 7%.

The alert comes at a time when new Middle East tensions are driving up global crude prices and reigniting anxiety about energy supply. In South Africa – where fuel is a net import – it can often be a short leap to pricey petrol, transport and food.

Consumer inflation, which has been relatively moderate so far this year, is likely to pick up, Bank of America said.

It predicted that headline inflation for April would reach 3.7%, while it saw May inflation at 4.1%, taking it above the Reserve Bank’s preferred 3% target rate of inflation and putting pressure on the policymakers.

The bank indicated that the SARB would most likely be increasing rates in May in order to “anchor” inflationary expectations around the target.

Given that interest rates are likely to increase further, why?

The central bank has been taking a cautious approach in recent months, saying that there is a risk of additional external pressures, currency depreciation and “stickiness” in domestic pricing.

The rise in the rate would indicate that policymakers are still very much concerned with maintaining price stability despite continued weak economic activity.

Faster rates will help to bring down inflation by dampening demand, but also cost households and businesses more to borrow.

This leaves the Reserve Bank in a challenging situation, with consumers feeling the pinch of the high cost of living and a slow economy.

The main threats are fuel prices and food prices.

The biggest push now would be from increasing fuel prices, which could affect the cost of living, Bank of America said.

Transportation costs increase, companies pay more for transporting their goods, and food producers incur higher input costs.

The bank added that fertiliser prices may cause further inflationary pressure later in the year. South Africa is highly reliant on fertiliser imports and is therefore exposed to price fluctuations in the international market.

Food inflation may get further firmed up in the coming months if those costs persist at the current high level.

Prices can remain elevated for extended periods of time.

Bank of America predicted inflation would stay near 4% for most of 2026, hit a high of near 4.4% in early 2027, before easing slowly after that.

That indicates that there’s not a lot of headroom to cut rates further in the immediate future.

The Reserve Bank could call it a day on the tightening spree later this year if oil prices go down and geopolitical tensions abate.

If, however, crude prices stay high or the rand deprecates by a large margin, the costs are likely to be pushed up further.

The message for investors, businesses and homeowners isn’t finished yet: South Africa’s fight against inflation may be far from over, and rates may remain elevated for a while.