South Africa's central bank maintained its main lending rate at 6.75% on Thursday, saying caution was needed as higher energy prices triggered by the U.S.-Israel war against Iran would push up inflation.

Economists polled by Reuters had expected no change in the repo rate, as the Middle East conflict has forced central banks around the world to revise their forecasts and reconsider the path for interest rates.

South Africa's inflation was well-contained in the months before the conflict, slowing to the central bank's 3% target in February, but it is expected to pick up as the effects of anticipated fuel price hikes and a weaker exchange rate filter through.

The decision by the Monetary Policy Committee of the South African Reserve Bank (SARB) was unanimous.

"We warned of elevated risks, and we have been proceeding cautiously in our rate setting," Governor Lesetja Kganyago said, reading out the decision. "Now a crisis has hit, this prudent approach is proving appropriate."

The central bank expects headline inflation to accelerate to around 4% soon, with fuel inflation of more than 18% for the second quarter.

Before the U.S. and Israel started the war and then Iran retaliated, economists had been predicting further policy easing by the SARB this year.

But those bets are now off.

Kganyago said the SARB's projection model showed rates unchanged for a longer period, postponing cuts seen in January.

The bank kept its economic growth forecasts for this year and next unchanged at 1.4% and 1.9%, respectively.

ADVERSE WAR SCENARIOS
As a net fuel importer, South Africa is heavily exposed to the spike in global energy prices triggered by the Iran conflict. Its currency, the rand, is highly sensitive to risk and has weakened more than 6% against the dollar since the war broke out.

The central bank said on Thursday that it had considered two adverse scenarios for the Iran war, one where the conflict lasts for another two months or more and another where it lasts more than a year.

In both, inflation is above its 3% target and requires higher interest rates to contain price pressures. In the most adverse scenario, inflation rises above 5%, only returning to target in 2028.

Kganyago said before the war conditions were favourable and it looked like inflation would settle around the central bank's 3% target fast. He added: "Now there has been a negative shock, and it could take a bit longer."