Last week, the Fed minutes set the tone, showing unanimous support for September’s hike while signalling another move could come before year-end. Locally, the SARB’s Monetary Policy Review warned that persistent price shocks could trigger second‑round effects.
International market developments
The Fed minutes revealed unanimous backing for September’s quarter‑point hike, though officials differed on the reasoning. Some saw the move as precautionary against energy and supply shocks, while others argued it was needed to counter demand‑driven inflation. Most participants judged another increase appropriate before year‑end, but the minutes gave no clear signal on timing. Policymakers stressed decisions would remain data‑dependent, with inflation risks still elevated despite some moderation. Markets initially priced in an October hike, but expectations have shifted toward December, with Treasury yields climbing to multi‑decade highs as investors anticipate a higher policy path.
Meanwhile, tensions in the Middle East rose after reports that the Pentagon had prepared options for strikes on Iranian targets. Sentiment improved when President Donald Trump ruled out further attacks before the 3 November midterm elections and described talks with Tehran as productive, though the blockade remained in place and negotiations faced significant obstacles. Oil prices surrendered part of their earlier gains as expectations of near‑term supply disruptions declined, though risks persist from Iran’s blockade, wider regional conflict, and Houthi activity near Red Sea shipping lanes.
Looking ahead, informing the Fed’s next decision will be Wednesday’s CPI print for September.
Local market developments
The SARB’s Monetary Policy Review warned that repeated inflation shocks were increasing the likelihood of broader second-round effects. Although the Bank noted that a moderately restrictive stance and inflation at target had enabled a measured policy approach, its communication placed noticeably greater weight on upside risks. Food prices, inflation expectations, the rand and a possible El Niño event were identified as the main vulnerabilities, with officials cautioning that delaying action until price pressures became entrenched could prove costly.
Domestic cost pressure intensified as fuel prices reached record levels. The retail price of 93 unleaded petrol increased by R3.12/litre, or 12.3% month on month, to R29.88/litre, while low-sulphur diesel rose by R3.24/litre, or 11.0%, to R32.80/litre. The increase largely reflected more expensive international refined products, with Central Energy Fund data recording under-recoveries of R3.17/litre for petrol and R1.97/litre for diesel between 2 and 8 October.
Looking ahead, August mining production data on Tuesday will be the key domestic release.