Falling global oil prices are on course to lower South Africa’s inflation rate to the central bank’s 3% target faster than modeled, its governor said ahead of next week’s monetary policy meeting, prompting economists to scale back expectations of back-to-back interest rate hikes.
The South African Reserve Bank hiked rates for the first time in three years in May to meet its newly codified 3% inflation. But Governor Lesetja Kganyago said “the recent decline in oil should help too, getting us back to the 3% target a bit faster.” The remarks to foreign diplomats triggered an immediate reaction from Goldman Sachs, which replaced its call for an imminent 25-basis point hike with a decision to hold steady at next Thursday’s meeting.
But the respite from global markets may not last indefinitely. Though prices now sit at $79 a barrel, compared to as much as $120 months ago, new strikes between Washington and Tehran have once again brought traffic through the Strait of Hormuz to a halt.
