The South African Reserve Bank (SARB) has indicated that in a worst-case scenario, South Africans could face up to three more interest rate hikes this year.
The warning follows the bank’s decision to increase rates by 25 basis points (0.25%), pushing the repo rate to 7%, and the prime lending rate to 10.5%.
SARB Governor Lesetja Kganyago noted that escalating geopolitical tensions and the impact of the El Niño weather pattern, which brings severe drought conditions, could push inflation as high as 6%. This risk model accounts for mounting pressures on food inflation driven by surging fuel prices, elevated fertiliser costs, adverse weather threatening crop yields, and an extended maritime blockade in the Strait of Hormuz.
Addressing the looming agricultural risks, Kganyago clarified that while the country has not yet suffered a severe food shock, the central bank expects one to be on the horizon.
“It is not so much that we have had a food shock, but we expect that to be coming,” Kganyago said. “Firstly, we’re lucky that the planting season for the summer crops was already done before the shock hit. The winter crop will fill it, but agriculturists tell us that they are not as demanding on fertiliser as the summer crops are. If there is indeed a food shock, that’s why we modelled the El Niño, which will act as an additional shock.”
–SABC/ChannelAfrica–
