Reserve Bank: Interest rates could go up

Rising oil prices coupled with those for food pose challenges to the economic and inflation outlook for most food and oil-importing countries, according to the Financial Stability Review (FSR) of the SA Reserve Bank (SARB) released Wednesday.

The document focuses mainly on economic and financial sector developments for the six-month period ended December 2010.

Higher inflation outlooks could "necessitate monetary tightening", the SARB said in its FSR.

Consensus among economists is for the bank to start hiking lending rates in early 2012, but a growing number of analysts were now forecasting a rate hike as soon as the last quarter of 2011.

Economic growth in emerging market economies (EMEs) for 2011 and 2012 was forecast to be slightly lower, the FSR said, with certain downside risks. A rapid rise of inflation pressures and overheating pressures, partly driven by capital inflows, were identified as the key risks.

"Rising inflation levels have become a major concern in some EMEs. Higher inflation rates, in combination with robust economic growth, have prompted authorities to tighten monetary policy over the past few months," the FSR noted.

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