The South African Reserved Bank (SARB) will be watching carefully the impact of the high oil price on inflation in the country, SARB Governor Tito Mboweni said on Friday.
Addressing a meeting of Parliament’s joint finance committees on Friday morning, Mboweni acknowledged that there is nothing to be done to influence high oil prices, but that if the bank sees the “first-round” impact of the higher price on inflation beginning to spread to the “second round”, then he will “begin to get worried in the near future”.
“If everyone starts raising their prices and there is a widespread effect, we will be worried. We will be watching the situation carefully,” he told MPs.
The rising oil price, which has been more than $40 per barrel for more than two weeks, is one of the key risk factors in the SARB continuing to meet its inflation target of between 3% and 6% CPIX (consumer inflation less mortgage costs).
Mboweni cited four factors as contributing to the high oil price: a reduced oil supply from Iraq; worries over instability in Saudia Arabia, the world’s largest oil producer; the stand-off between the Russian government and Russian oil group Yukos, which has threatened supplies; and concerns that demand will not be met.
“Our situation is that there is nothing we can do,” he acknowledged. “We consider the higher oil price to be an exogenous shock to the system.” — I-Net Bridge