Researchers behind a South African Reserve Bank (SARB) note say policymakers need to judge whether supply shocks will drive persistent second-round inflation, a distinction that shapes how they respond to price pressure.
Witness Simbanegavi and Mokgabiso Tshenkeng published the note Oct. 28 as part of a six-note bulletin on how oil-price shocks can produce follow-on inflation. The series focuses on the 2026 oil shock. The bulletin is one of the SARB’s occasional research releases; its disclaimer says the views belong to the authors and do not represent the bank or its policy.
The authors distinguish immediate price effects, which are easier to identify, from indirect effects that can be difficult to detect as they unfold. The policy question is whether the original shock will lead to persistent second-round inflation.
They urge officials to compare the scale and speed of the initial price move with earlier supply shocks, then watch for wage and inflation expectations to carry that increase into broader prices. The authors associate the 2008, 2011 and 2022 oil shocks with more pronounced second-round pressures. They say those pressures have been more contained since around 2017.
Higher fuel costs can leave companies choosing between charging customers more and absorbing the expense in their margins, according to the note. It also warns that tightening policy to curb inflation can further weaken economic activity.
The authors identify wage and inflation expectations, along with first-round effects, as indicators for policymakers to monitor. South African wage data are not collected monthly, while inflation-expectations data are available quarterly, the note says.
