The central bank of South Africa is preparing to revise its economic risk scenarios as rising oil prices linked to the Middle East conflict create new uncertainty for the country’s economy.
Governor Lesetja Kganyago said the South African Reserve Bank will redraw its projections before the next interest-rate decision scheduled for March 26. At its last meeting in January, the bank kept its key lending rate unchanged at 6.75% after a divided vote among policymakers.
Previously, the central bank had considered three possible economic paths: a baseline outlook, an optimistic scenario, and an adverse scenario. The worst-case scenario assumed oil prices averaging about $75 per barrel and the South African rand weakening to 18.50 against the U.S. dollar.
However, recent developments—especially the conflict involving Israel, the United States, and Iran—have pushed oil prices even higher. The global benchmark Brent Crude recently rose above $94 per barrel.
Despite the higher oil prices, the rand has not weakened as much as feared and is currently trading around 16.82 to the dollar. Kganyago explained that movements in the exchange rate often have a bigger impact on inflation in South Africa than oil prices alone.
He emphasized that policymakers must determine whether the economic effects are temporary or long-lasting before responding with interest-rate changes. Central banks generally react only to persistent inflation pressures rather than short-term shocks.
The decision later this month will therefore depend on whether the recent global turmoil leads to lasting price increases within South Africa’s economy.
Source: TRT Africa
