Borrowers should brace for bad news as inflation pressures grow and traders raise their bets that the South African Reserve Bank (SARB) will raise interest rates in November after it warned of upside risks to its inflation outlook.
Piling on the bad news is an expected “notable rise” in petrol prices next month as an increased demand for gas and coal fuels oil prices, the biggest threat to inflation. Economists at the Bureau for Economic Research warned that the extent of the increase will depend on local currency moves during the remainder of the month.
The rand opened trade at R15.07 against the US dollar this morning as a risk-off mood returns to the markets and as business confidence unexpectedly slumped in September. The focus now turns to the release of manufacturing production data out today and September retail sales numbers out tomorrow.
South Africa’s inflation rate climbed for the first time in three months in August to 4.9% from a year earlier, and price-growth expectations, as measured by the five-year breakeven rate, are now at the highest since May 2019, reports Bloomberg.
According to Bloomberg, if one or more members of the SARB’s MPC votes for a rate hike next month, that would be the first time since November 2018, when three of the then-six member committee preferred a 25 basis-point increase and the rest an unchanged stance. The final decision then was to hike to 6.75%.
As the UK already indicated a move higher to keep a lid on inflation, the SARB would be mindful of the ruinous effect of an investor flight to safety should South Africa fall behind on the rates curve.
Meanwhile, Bloomberg reports a rally in Bitcoin paused around the $57,000 level this morning amid ongoing speculation that the largest cryptocurrency could retest the record highs reached earlier this year.
Here’s a roundup of the world’s top and most interesting headlines:
SA Business
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Global Business
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Markets
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Opinion/In-depth
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Video
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