Record fuel prices to drive inflationary pressures
South Africa’s petrole prices are set to rise to a record on Wednesday, adding to inflationary pressures in an economy that imports almost all of its fuel.
The retail cost of 95-octane gasoline will climb by almost 7% to a R19.54 a liter, the Central Energy Fund said in a statement on its website. Higher average oil prices, a weaker rand and higher levies on petrol and diesel are behind the latest increase, the fourth in the past five months.
Fuel accounts for almost 5% of South Africa’s inflation basket and higher costs relative to 2020, when oil prices plunged after the onset of coronavirus pandemic, have been driving price growth this year. Annual inflation quickened to a four-month high of 5% in September.
The South African Reserve Bank prefers to anchor inflation expectations close to the 4.5% mid-point of its target range and its recent warnings of upside risks have caused a jump in traders’ rate-hike bets. Forward-rate agreements starting in one month, used to speculate on borrowing costs, fully price in a quarter-point increase in the benchmark repurchase rate in November.
The implied policy rate path of the central bank’s quarterly projection model, which the monetary policy committee uses as a guide, indicates a 25-basis point increase in the final quarter of 2021 and in every quarter of 2022 and 2023.
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