Traders are betting on a larger rate hike in South Africa later this month as the rise in the price of crude oil drives inflation expectations.
Forward rate agreements starting after the next meeting of the Monetary Policy Committee on March 24 praise a rate increase of 41 basis points, as an 82% chance of a 50 basis point increase, compared to 32 basis points two weeks ago.
The South African Reserve Bank has not increased its benchmark rate by more than a quarter point since January 2016.
The market is pricing 234 basis points of increases over the next 12 months, up from 175 three weeks ago. Investors are betting that the central bank will have to respond to price pressures driven by rising oil prices.
Investor inflation expectations, measured by the five-year break-even rate, climbed to its highest level in more than three years on Monday, when Brent crude hit $ 120 a barrel. The fuel price of South Africa is benchmarked with the rand price of Brent oil, and is already at a record high.
In resint to study by a central bank economist found that a 10% increase in gasoline prices adds 1.2 percentage points to headline inflation.
Traders are betting on a big interest rate hike for South Africa
Source link Traders are betting on a big interest rate hike for South Africa