It looks like there will be another interest rate hike on the horizon, according to Bank of America.
In a new report by the banking institution, the South African Reserve Bank (SARB) may implement another hike by 25 basis points in November 2023.
The research argues that global oil prices, the instability of the rand and the recent bird flu outbreak are the major reasons for possible interest rate hike.
“A combination of rising oil prices, a higher-for-longer rates narrative and fiscal risks in emerging markets are likely to weaken emerging market currencies further, and a stronger dollar should continue to weaken the rand, in our view,” Bank of America said.
Rising oil prices will therefore impact South Africa’s interest rate decision.
ISRAEL AND PALESTINE WAR AND IMPACT ON OIL PRICES
The impact of the war between Israel and Palestine has had a major impact on global oil prices.
Old Mutual Wealth Investment strategist, Izak Odendaal, said on Monday that, “the war comes at a precarious moment for a global economy absorbing a record surge in interest rates”.
He notes that whenever there is upheaval in the Middle East, all that investors look at is the oil price.
“It is through oil that this region matters greatly to the global economy,” Odendaal said.
“The Brent crude oil price rose immediately after Hamas launched its attacks, and fears of escalation drove it higher towards the end of the week where it closed at $90 per barrel.”
At 10am the price of Brent crude oil per barrel was $90.01 (R1,689.76). There is some hope, as Odendaal says that while the price of oil is “uncomfortably high, the moves are small in the context of the volatility of the past four years and even the past few months”.
NOT ALL DOOM AND GLOOM
SA motorists could be facing some good news for once, with a possible decrease of fuel prices.
Early data points to a possible fuel price cut for November.
This does come with a major caveat, as the current conflict in the Middle East could send oil prices up at any moment.
The latest daily snapshot from the Central Energy Fund (CEF) shows that substantial fuel price decreases are looking likely for November, particularly in the case of petrol.
The unaudited CEF data points to a possible decrease of around R1.97 per litre for 95 Unleaded petrol and R1.92 for 93 ULP, and if current trends persist, those numbers could grow further.
Unfortunately diesel is not showing as big an over-recovery at present, with CEF data pointing to a decrease in the region of 80 cents per litre for 500ppm.