South Africans can expect another interest rate hike this year amid concerns over global oil prices. <\/p>\n\n\n\n
According to the Bureau for Economic Research (BER), the rand’s losses last week – a 3% decrease versus the US dollar – intensified concerns about the deteriorating inflation outlook. <\/p>\n\n\n\n
“With this in mind, there is a rising probability that the SA Reserve Bank\u2019s (SARB) Monetary Policy Committee (MPC) will increase the repo rate by another 25bps (to 8.50%, prime rate to 12%) at its next meeting on 23 November,” the BER said. <\/p>\n\n\n\n
“This view is also informed by the fact that there were already two (out of five) votes for a 25 basis points increase at the July and September MPC meetings.”<\/p>\n\n\n\n
Despite the near-term inflation challenges, the November policy decision is unlikely to get the support of all five members. <\/p>\n\n\n\n
Large amounts of data for September showed that there will likely be a halt in real GDP growth momentum during Q3 2023. <\/p>\n\n\n\n
Although the S&P Global Purchasing Managers Index (PMI)<\/a> – which tracks sentiment in the private sector – stayed around its neutral 50.0 mark amid an improvement in employment<\/a>, the ABSA PMI recorded the most significant contraction since July due to declining output and weak demand. <\/p>\n\n\n\n In addition, Naamsa said that aggregate domestic new vehicle sales dropped by 4.1% y-o-y amid higher fuel prices, logistics issues, load shedding and commodity price volatility. <\/p>\n\n\n\n Seasonally adjusted new vehicle sales also dropped by 7.7% quarterly. That said, year-to-date export sales are 8% higher than the corresponding period in 2022.<\/p>\n\n\n\n The 10% decrease in the oil price to below $85\/bbl also relieved some fears over the inflation outlook, indicating that another SARB hike in November is not a foregone conclusion. <\/p>\n\n\n\n “Unfortunately, last week\u2019s sharp oil price decline may be short-lived<\/strong>,” the economists said. <\/p>\n\n\n\n This is after the Palestinian militant group Hamas attacked large parts of Israeli territory, with Israel responding by bombing large parts of the Gaza strip. <\/p>\n\n\n\n “The renewed and severe escalation in the long-running feud between Israel and Hamas has the potential to turn into a regional Middle East conflict that potentially involves major oil producers like Saudi Arabia and Iran,” the BER said. <\/p>\n\n\n\n “This concern saw the Brent crude oil trade almost 4% higher at around $88\/bbl in Asia this morning. Amid the uncertainty created by the weekend events, gold was trading 1% higher at 06h00 this morning.”<\/p>\n\n\n\n
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