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Fuel prices increased by 3.1% month on month in September following an increase in Brent crude oil prices which reached US$90 per barrel. The local petrol price increased by R1.71 per litre and diesel rose by R2.80 per litre. This resulted in inflation increasing from 4.8% year-on-year in August to 5.4% year-on-year in September.
The inflationary risks remain high due to the likelihood of geopolitical tensions in the Middle East escalating the longer the Israel-Hamas conflict continues leading to even more pronounced oil market disruptions.
Although local interest rates have bottomed out and are within the SARB range, the Rand's weakness from likely further US rate hikes, uncertainties about load shedding, dry weather conditions, and high global oil prices imply that inflationary risks remain high.
As such, the expected rise in CPI in September further supports the view that local interest rates will remain higher for longer and might result in a rate hike at the November 2023 meeting followed by mild easing in 2024. The SARB is expected to remain hawkish as inflation ticks up.
Household incomes are expected to remain under pressure as the cost of living continues to rise due to the soaring cost of fuel, food, and family life.
