Higher oil prices, SA’s terms of trade and fuel inflation

The latest economic data suggest that South Africa’s recovery has gained ground, and some sectors will benefit from elevated metals prices caused by the war in Ukraine. But at a macro level, a mounting oil import bill is likely to offset these gains. High oil prices will also push up fuel inflation and take the headline rate above target in the coming months. Even so, there are reasons to think that Reserve Bank officials will not raise interest rates as aggressively as investors currently expect.