RFA Breakfast Paper - March 26, 2026

SARB Holds at 6.75%, Flags Inflation Risks from Middle East Conflict

The South African Reserve Bank kept its repo rate unchanged at 6.75% on March 26, 2026, marking a second consecutive pause, as policymakers highlighted upside inflation risks linked to the ongoing Middle East conflict. While inflation recently aligned with the 3% target in February, the bank expects higher energy prices to push headline inflation to around 4% in Q2, driven largely by fuel inflation exceeding 18%, before easing back toward target by late 2027. Reflecting these risks, inflation forecasts were revised higher to 3.7% for 2026 (from 3.3%) and 3.3% for 2027 (from 3.2%). The SARB also scaled back its easing outlook, now projecting just one rate cut instead of two, as it assesses both a short-term (two-month) and prolonged (one-year) Iran conflict scenario—both implying a need for higher-for-longer rates in South Africa.

U.S. Stocks Fall as Oil Surge and Geopolitical Tensions Pressure Markets

U.S. equities declined notably, led by tech, as rising oil prices and renewed Middle East tensions weakened sentiment. The Nasdaq Composite dropped about 2.4%, while the S&P 500 fell 1.7% and the Dow Jones Industrial Average lost 1.0%. Concerns over supply disruptions and persistent inflation grew as ceasefire signals remained unclear. Treasury yields also rose, with the 10-year yield reaching 4.43%, reflecting expectations of prolonged policy caution. Global markets mirrored the risk-off tone, with Europe closing lower and Asia mixed.

Despite the decline, the broader outlook remains relatively stable. The current oil-driven shock is likely to slow growth and raise inflation but not trigger a severe downturn, given stronger fundamentals and lower oil dependence. While volatility may persist in the near term, stabilizing energy prices could support market recovery over time.

Nigerian Equities Record Modest Gains Amid Declining Market Activity

The Nigerian equity market ended the session on a modest positive note, with both the NGX All-Share Index and Market Capitalization advancing by 0.11%. Investors maintained selective interest in medium and large-cap stocks, particularly MTNN and GTCO, which supported the market’s gradual climb. The index gained 219.87 points to close at 200,925.75, while market capitalization increased by ₦141.14 billion to ₦128.98 trillion. Despite this upward movement, trading activity slowed significantly, as both volume and value traded declined by more than 55%. WEMABANK led in trading volume, while MTNN dominated in value traded.

Performance across the market remained mixed but slightly positive overall. LEGENDINT topped the gainers’ chart, while FIDSON led the losers. Market breadth closed marginally positive, with 32 gainers against 30 losers. Sectoral performance also reflected this mixed sentiment, as gains in Insurance, Consumer Goods, and Oil & Gas were offset by declines in Banking and Industrial Goods, highlighting cautious investor positioning.