It is widely expected that the South African (SA) Reserve Bank\u2019s Monetary Policy Committee (MPC) will increase interest rates by 25 basis points as it wraps its meeting this Thursday afternoon.<\/p>\n
This is a result of the Middle East conflict, which registered the first major impact on inflation in April.<\/p>\n
Headline consumer price inflation jumped to 4% in April, up from 3.1% in March, well above the bank\u2019s 3% target.<\/p>\n
The ongoing war in the Middle East has had an adverse impact on global oil prices.<\/p>\n
SA has not escaped the impact, resulting in higher fuel prices on the local front.<\/p>\n
Independent Economist Elize Kruger says, \u201cWhile central banks generally tend to look through supply shocks such as the oil spike currently playing out, the probability of second-round effects, that is price increases in the broader basket as a result of the higher fuel prices and the potential of de-anchoring of inflation expectations, will be top of mind for MPC members this week. With an average inflation forecast of 4,4% for this year and 4,1% for 2027, I think the MPC will likely opt to hike rates pre-emptively in response to the inflation deterioration outlook.\u201d<\/p>\n
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