Reserve Bank’s MPC expected to hike interest rates by 25 basis points
It is widely expected that the Reserve Bank’s Monetary Policy Committee (MPC) will increase interest rates by 25 basis points as it wraps its meeting on Thursday afternoon.
This is a result of the Middle East conflict, which registered the first major impact on inflation in April.
Headline consumer price inflation jumped to 4% in April, up from 3.1% in March, well above the bank’s 3 per cent target.
The ongoing war in the Middle East has had an adverse impact on global oil prices.
South Africa has not escaped the impact, resulting in higher fuel prices on the local front.
Independent economist Elize Kruger says, “While 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.”