Households brace for pressure as fuel prices cloud interest rate outlook

South Africans hoping for interest rate relief may have to wait longer, as rising fuel prices driven by global tensions threaten to push inflation higher.

The South African Reserve Bank’s Monetary Policy Committee is expected to announce its decision later Thursday, with economists warning that an oil price surge has changed the outlook.

Oil price surge shifts expectations

Chief economist at the Bureau for Economic Research, Lisette IJssel de Schepper, said earlier expectations of a rate cut have faded.

“The data itself was pointing to rate cuts, and now, after the surge in oil prices, that is unlikely.”

She said the duration of the oil price spike will be critical.

“If the war drags on for longer, then rate cuts will be pushed out even further.”

Pressure on the cost of living and debt

Higher fuel prices typically feed into transport and food costs, raising broader inflation and squeezing household budgets.

This is particularly concerning for consumers already struggling with debt, as delayed rate cuts mean borrowing costs remain high for longer.

Reserve Bank likely to hold rates for now

Despite the pressure, the economist does not expect an immediate rate hike.

“I don’t see the South African Reserve Bank hiking interest rates in March.”

Instead, the central bank is expected to assess how fuel price increases filter through the economy before making further moves.

Inflation target remains key

The Reserve Bank is expected to stick to its 3% inflation target, despite global uncertainty.

“It’s very important if you set a target, that you stick with that target.”

While temporary spikes in inflation may be tolerated, maintaining long-term stability remains the priority.

Longer-term outlook uncertain

While rates may hold in the short term, the longer-term outlook is increasingly uncertain.

“It could well be that later this year we’re talking about interest rate hikes.”

Much will depend on how long global tensions persist and whether higher fuel prices lead to sustained inflation across the economy.

For now, households face continued pressure, with fuel prices emerging as the key driver shaping inflation, interest rates, and the cost of living.

For more information, listen to Lisette IJssel de Schepper on 702/CapeTalk’s Early Breakfast with Africa Melane using the audio player below: