According to calculations by the Big Mac Index, the rand is currently valued twice as high as it should be against the US dollar. The publication The Economist concluded that the local currency is undervalued by 52.04% against the US dollar, based on the price of a Big Mac in South Africa.
This index, created by The Economist in 1986 as a humorous analysis of purchasing power parity, has become one of the most well-known alternative indicators for determining whether currencies are overvalued or undervalued. Simply put, if the rand were trading at the rate implied by the index, a Big Mac would cost approximately half as much in dollar terms, reflecting the weakness of the local currency rather than a decrease in prices at McDonald's.
At the time of publication, as the Index marked its 40th anniversary, the local currency remained stable after the US Federal Reserve did not change interest rates. On Friday morning, the rand traded around 16.48 per dollar following a calm market reaction to the Federal Open Market Committee's (FOMC) decision to keep the benchmark rate in the range of 3.50% to 3.75%.
Despite criticism that one burger cannot accurately reflect an economy, the publication maintains that the index remains relevant because the Big Mac accounts for numerous factors, including ingredients, labor, rent, and utilities, serving as a useful indicator of local purchasing power.
Federal Reserve Chairman Kevin Warsh stated that the US economy continues to show resilience despite inflation exceeding the central bank's target of 2%. He noted: 'The economy is showing impressive resilience. Even with recent shocks, trends are positive and demonstrate solid growth. Inflation remains elevated relative to the Committee's two percent target.'
Investec Chief Economist Annabel Bishop believes that the Fed's decision had no immediate impact on the rand. She emphasized that with expected unchanged rates in the US, it is unlikely to cause a weakening of the rand, as typically happens during an Fed rate-hiking cycle.
Andre Sillier, a currency strategist at TreasuryONE, reported that the wider US dollar stabilized after Wednesday's sell-off following the Fed meeting, which helped the rand maintain recent gains. He previously noted that 'against this backdrop, the rand is holding its recent gains, trading almost unchanged around 16.50.'
The currency approached the 17 level after the South African Reserve Bank announced a rate hold, which was an unexpected move and deterred international investors. Sillier links the currency's stability to slowing oil prices and improved global risk appetite, although falling gold prices and persistent domestic political issues limit further growth.
The Economist concludes that after four decades, the Big Mac Index remains a surprisingly effective reminder that exchange rates can significantly deviate from basic purchasing power, even when traders focus on interest rates, inflation, and geopolitics.
The Reserve Bank's Monetary Policy Committee (MPC) decision to keep the repo rate at 7.0% was unexpected, despite inflation rising from 4.5% in May 2026 to 5.0% in June. The MPC explained this by noting that economic growth remains under pressure, mentioning risks of slowing growth in its statement.
The Committee indicated that the forecast derived from the Quarterly Projection Model (QPM) suggests that the key interest rate will remain relatively stable for the remainder of the year. According to the model, rate cuts are expected later when inflation drops to 3%, and rates will adjust to a neutral level. Furthermore, the MPC asserted that the stronger rand since the beginning of the year helped reduce fuel prices in July, and food inflation remained moderate, increasing by only 1.4%, while further significant declines in fuel prices were anticipated.
The MPC's decision to maintain the repo rate unchanged appears contradictory, as the statement acknowledged that services inflation remains a complex issue, with most components exceeding the 3% mark, including housing, transport, and insurance. The MPC also noted that various core inflation indicators point to intensifying inflationary pressures. Moreover, the latest survey by the Bureau of Economic Research showed an increase in inflation expectations, with short-term expectations being higher than long-term ones. All groups surveyed within this bureau predicted higher inflation, with the largest increase recorded among trade unions.
Despite the MPC's choice to keep interest rates unchanged, financial markets demonstrated disagreement. Following the MPC announcement, the rand sharply depreciated against the US dollar, euro, and British pound, reaching R16.80 to the dollar on Thursday and trading at a weak R16.96 to the dollar on Friday, closing the week at R16.83 to the dollar. The oil price shock situation also continued last week: disruptions on three fronts in the Strait of Hormuz, Red Sea, and Black Sea pushed Brent crude oil prices above $100 per barrel on Thursday. Although prices slightly decreased to approximately $98 per barrel, leading to a modest recovery in stock markets and lower bond yields on Friday, global markets remained under pressure.
On the JSE, the All Share Index (ALSI) lost 1.8% on Friday following the MPC's decision and the sharp rise in oil prices. Although the price of gold recovered from $4,007 last Monday to $4,073 on Friday, and platinum and palladium also strengthened, most JSE indices ended the week lower. Ultimately, the ALSI was nearly flat, showing a gain of only 0.15%, while remaining 14.3% below the level recorded before the US attack on Iran. A similar trend is observed across most major global indices.
Although the initial recovery of petrol prices to 3.57 per liter and diesel to 5.10 per liter looked promising at the beginning of July, the sharp rise in oil prices from $76 to $96 per barrel over the last four weeks, combined with the rand weakening by more than 40 cents last week, ruled out any prospects of fuel price decreases in August. By last Thursday, the recovery in diesel prices had already shrunk to 110 cents per liter. Meanwhile, 95 ULP petrol still showed a recovery of 41 cents per liter, but prices for both fuels are expected to rise next month, with the increase in diesel likely being sharper.
This week, domestic and global financial markets will focus on the Federal Open Market Committee (FOMC) of the US Federal Reserve's interest rate decision, which is scheduled for Wednesday. The general consensus suggests that this benchmark rate will remain unchanged at 3.75%. If the FOMC decides to raise interest rates, the rand, bonds, and South African stocks are likely to come under significant pressure. The Bank of England (BoE) is expected to announce its interest rate decision on Thursday, with markets predicting it will also leave rates unchanged at 3.75%. On Thursday, the US will release personal income and expenditure data, and the Eurozone plans to publish its June unemployment rate on the same day. Locally, Statistics South Africa (Stats SA) will publish government budget balance and June Producer Price Index (PPI) data on Thursday. The South African Reserve Bank will publish South Africa's trade balance on Friday.
Due to a global shortage of RAM spurred by the demands of artificial intelligence, the cost of various gadgets, from Apple's MacBook line to Xbox and PlayStation consoles, has significantly increased in South Africa, making 2026 a challenging period for buyers.
The main culprit behind this phenomenon is the global scarcity of RAM, unified memory, and storage space, which is caused by the insatiable demand of AI workflows. Modern users require more memory to run resource-intensive applications such as ChatGPT, Google Gemini, Microsoft Copilot, Claude, and Perplexity AI.
Although Apple was the last major tech corporation to raise prices, it managed to avoid an 'RAM apocalypse' until recently thanks to long-term supply contracts signed in advance. However, over the past year, Windows-based laptops have shown multiple price increases, which briefly made Apple a more attractive brand, but now the old order has been restored, and Apple is once again setting high prices for its hardware.
For instance, the 13-inch MacBook Air M5, which cost R19,999 before the recent price hike, is now selling for R26,499, representing a sharp jump of over 32%. Furthermore, Apple's most affordable 2026 model, the MacBook Neo, has risen from an initial price of R11,999 to R13,999, an increase of R2,000 or 16.67% in a short time. This means that the entry-level MacBook Air is almost twice as expensive as the Neo, and budget buyers are likely to opt for the Neo despite performance compromises.
The problem is not limited to computers. The Xbox Series S and Series X consoles, released about six years ago, have also seen price increases. The Series S model launched at $300 (equivalent to approximately R5,100 at the standard exchange rate), and the Series X cost $500 (about R8,600). Although local import costs initially made them slightly more expensive in South Africa, the rise was not as dramatic. The author purchased an Xbox Series S in March 2023 for R5,999, but today the same console costs R9,998, an increase of R4,000 for a six-year-old device.
Instead of the expected price drop, the price continues to climb. To get the top-tier Series X, it will cost around R14,999. When the author bought the Series S, the Series X price of R11,000 seemed too high given the R5,000 difference between the models, which would allow buying almost two Series S units for the price of one. Microsoft is not alone in this situation: Sony's base PlayStation 5 Digital Edition has risen from $400 at launch in 2020 to $500 by 2025. PlayStation maintains its lead in the console race, with about 75 million units sold compared to 31 million for Xbox, meaning millions of gamers are feeling the same pressure.
Thus, purchasing almost any new electronics during 2026 will be expensive. However, there is uncertainty about when prices might stabilize, making the current moment both the best and worst time to make a purchase.
